The reality: Arnold swept the state’s problems under a giant rug, then created even more problems. In particular, he imposed AB 32, the Global Warming Solutions Act of 2006, which has crippled industry ever since, especially destroying the good middle-class jobs industry produces. And SB 375, the Sustainable Communities and Climate Protection Act of 2008, which is pushing Californians into high-rises and mass transit, while Arnold and his elitist friends frolic in gigantic beach-community compounds and tool around the streets in Bentleys.

And look at these budget numbers. When he took office in October 2003, Arnold assumed control of the fiscal year 2003-04 budget, which began on July 1, 2003, and it spent $78.3 billion. The budget he signed for 2006-7, just three years later, was for $101.4 billion — an incredible 29 percent increase! (See Appendix Schedule 6 here.)

Instead of sweeping away waste, Arnold effectively said to Democrats, “Achtung! Give me your biggest. most wasteful spending programs and I’ll sweep them into the budget!”

No wonder, when the recession hit in 2007-08, he went to the Democrats running the Legislature and said, “Achtung! Give me a record tax increase, and I will sweep it into the budget!”

Which is what happened with the $13 billion tax increase of Feb. 2009.

When President Hoover’s crashed America into the Great Depression, it took Republicans five decades for their party to recover at the national level under Ronald Reagan, himself a former FDR New Deal Democrat. And in some ways, the national GOP still haven’t recovered from Hoover. It hasn’t mattered that President Roosevelt’s New Deal was even worse than Hoover’s. Perceptions count.

It well could take the CA GOP five decades to recover from their Arnold Problem.

Pushing people into high rises is the goal of Senate Bill 1, the Sustainable Communities Investment Authority bill by Senate President Pro Tem Darrell Steinberg, D-Calif. Term limited out of office next year, it’s a key piece of the legacy he hopes to leave behind for California. SB 1 will be heard in the Assembly Local Government Committee Wednesday, Aug. 14 at 1:30 p.m.

It follows Steinberg’s SB 375, the Preferred Growth Scenario bill, which then-Gov. Arnold Schwarzenegger signed into law in 2008. Along with Schwarzenegger’s better-known AB 32, the California’s Global Warming Solution Act of 2006, SB 375 was a keystone in the Steinberg-Schwarzenegger blueprint for a green, “sustainable” California of high rises.

The Preferred Growth Scenario requires all transportation plans and funds in the state must pack an absolute minimum of 10 families into an acre land. SB 375 basically means the state of California, by law, officially is pushing people out of single-family homes and into high-rises.

“Welcome to the brave new world of central planning,” then state Sen. Tom McClintock said back in 2008. “The denser the better.”

SB 1

The new bill, SB 1, advances that central state plan. SB 1 resembles failed ballot initiative Proposition 31, which voters defeated in November last year, 61-39. As CalWatchdog.com’s Wayne Lusvardi was the first to reveal, Prop. 31 could have authorized “the state to withhold or divert taxes from local governments unless those governments adopted a ‘Strategic Action Plan’ to distribute the revenues from the suburbs to the large urban cities.”

Such tax sharing actually means redistribution.

SB 1 would set up the Sustainable Communities Investment Authority, which would be a new state agency effectively implementing Prop. 31’s Strategic Action Plan.

Redevelopment 2.0

SB 1 would authorize both bonds and more taxes to fund these 
”sustainable communities.”

In 2011, Gov. Jerry Brown and the Legislature eliminated redevelopment to take the $1.5 billion a year being spent on it. Redevelopment originally was supposed do mean clearing “blighted” areas. But it ended up being used to seize middle-class homes and businesses to give the property to influential developers of Big Box commercial areas.

Such abuse could return under SB 1, which is why it’s being dubbed “Redevelopment 2.0.” According to bill analysis, it would authorize certain public entities of a Sustainable Communities Investment Area to form a Sustainable Communities Investment Authority to carry out the Community Redevelopment Law, consistent with the state’s restrictions on sustainable development.

The United Food and Commercial Workers union praises SB 1 as giving “cities and counties a modest tool to support sustainable economic development that creates good jobs, affordable housing and a healthy environment.”

But as with the old kind of redevelopment, much of this SB 1 development of transit priority areas, clean manufacturing districts and small “walkable communities” will be funded through tax increment financing. 

“Tax increment financing is an alluring tool that allows municipalities to promote economic development by earmarking property tax revenue from increases in assessed values within a designated TIF district,” according to the Lincoln Institute of Land Policy. Proponents claim assessed property value within TIF districts grows much faster than in the rest of the municipality. But the Lincoln Institute found TIF areas grow no more rapidly, and perhaps grow more slowly, and “commercial TIF districts tend to decrease commercial development in the non-TIF portion of the municipality.”

Tax increment financing also would be authorized to support High-Speed Rail stations and related infrastructure.

Other bills

The outcome of SB 1 may be tied to a number of other bills on redevelopment. Some of the bills are new, and others are similar to redevelopment bills Brown vetoed last year:

* SB 33 by Sen. Lois Wolk, D-Davis, makes it easier for local governments to form infrastructure financing districts. A similar measure, SB 214, was vetoed by Brown last year.

* SB 391 by Sen. Mark DeSaulnier, D-Concord, would generate $500 million in affordable housing funds.

* AB 294 by Assemblyman Chris Holden, D-Pasadena, directs the California Infrastructure and Economic Development Bank to work with local government on transit-oriented development and affordable housing projects. And it would allow an infrastructure financing district to use the Educational Revenue Augmentation Fund portion of incremental tax revenue.

* AB 229 by Assembly Speaker John Perez, D-Los Angeles, would expand types of local projects that are financed by existing infrastructure financing districts. Brown vetoed the similar AB 2144 in September.

* AB 243 by Roger Dickinson, D-Sacramento, would authorize new redevelopment districts, and the issuance of debt for those areas with only 55 percent of the vote, instead of the two-thirds currently required.

By Chris Reed

California’s official embrace of trendy “smart growth” — the policy/religion that assumes it’s best for individuals, communities and Gaia for most people to live in densely packed areas near transportation hubs, so they don’t use devil fossil-fuel cars — was formalized in 2008 with the enactment of SB 375.

Sen. Darrell Steinberg’s brainchild was, of course, reflexively embraced by the L.A. Times’ George Skelton:

The glory that is (not) ‘compact development’

“The measure (SB 375) links regional planning for housing and transportation with California’s new greenhouse gas reduction goal (AB 32) enacted in 2006. …

‘If people are going to drive — and they are going to drive — we need to plan in ways to get them out of their cars faster. That means shrinking — not the amount of housing, not economic development, not growth — but shrinking the footprint on which that growth occurs.’

“Steinberg wants it to occur within a smaller circle around downtown.

“Basically the bill would work like this: Each metropolitan region would adopt a ‘sustainable community strategy’ to encourage compact development. They’d mesh it with greenhouse emissions targets set by the California Air Resources Board, which is charged with commanding the state’s fight against global warming.

“And this is the key part: Transportation projects that were part of the community plan would get first dibs on the annual $5 billion in transportation money disbursed by Sacramento.”

Greens: no more growth ‘in the wrong location’

“‘It’s a watershed moment for the environmental community,’ Tom Adams, board president of the California League of Conservation Voters, told the Assembly Local Government Committee on Tuesday as the panel approved the bill. ‘We realized we had to encourage growth, but growth in the right location. Otherwise, we’d get growth anyway, but in the wrong location.’

“Adams calls the measure ‘the most important land-use bill in California since enactment of the Coastal Act’ three decades ago.”

Five years later, the “smart growth” dream has never been realized in California. There are still seminars and press releases and politicians who promise that change is a-coming. Those behind the hype just can’t offer many concrete examples.

Why? The public just isn’t that into “compact development” and prefers to live in the “wrong location.” Even the powerful incentives that SB 375 provides can’t change this fundamental dynamic.

This is from a recent commentary by Chapman University’s wonderful futurist Joel Kotkin that looked at America’s fastest-growing cities since the recession.

“It was widely reported that the Great Recession and subsequent economic malaise changed the geography of America. Suburbs, particularly in the Sun Belt,, were becoming the ‘new slums’ as people flocked back to dense core cities.

“Yet an analysis of post-2007 population trends by demographer Wendell Cox in the 111 U.S. metro areas with more than 200,000 residents reveals something both very different from the conventional wisdom and at the same time very familiar. Virtually all of the 20 that have added the most residents from 2007 to 2012 are in the Old Confederacy, the Intermountain West and suburbs of larger cities, notably in California. … growth is still fastest in the Sun Belt, in suburban cities and lower-density, spread out municipalities. …

“Nothing in the data …  suggests a revival of the older, dense “legacy” cities that were typical of the late 19th century and pre-war era. Most of the fastest-growing big cities since 2007 are of the sprawling post-1945 Sun Belt variety … .

Suburban sprawl routs unpopular, dumb ‘smart growth’

The anti-smart growth pattern was particularly notable in California, Kotkin writes.

“The other somewhat surprising result is the strong performance of more purely suburban cities, that is, ones that have grown up since car ownership became nearly universal. They are not the historic cores of their regions but have developed into major employment centers with housing primarily made up of single-family residences. These include the city that has grown the second most in the U.S. since 2007: Chula Vista, a San Diego suburb close to the Mexican border, whose population expanded 17.7%. It’s followed in third place by the Los Angeles suburb of Irvine (16.3%); No. 7 Irving, Texas; and the California cities of Fremont (13th) , located just east of San Jose-Silicon Valley, and Oxnard (17th), north of Los Angeles.

“…  Americans continue to move decisively to both lower-density, job-creating cities and to those less dense areas of major metropolitan areas particularly where single-family houses, good schools and jobs are plentiful. …

“Migration numbers for 2010 to 2012 alone hammer home that suburban areas are continuing to attract people, and that the more dense core areas do not generally perform as well. Although their growth has slowed compared to the last decade, suburban locales, with roughly three-quarters of all residents of metropolitan areas, have added many more people than their core counterparts. …

“The urban future will continue to evolve in directions that contradict the prevailing conventional wisdom of a shift toward more crowded living.”

Bad news for Darrell Steinberg and the other Stalinist planners who want to dictate where and how we live. Good news for those who believe in the American dream of a single-family home with a car or two in the sprawl that green schemers so hate.

By John Seiler

According to the Daily Mail:

“He has been seen enjoying a number of dates with a mystery blonde in recent weeks but on Thursday Arnold Schwarzenegger was indulging in his first love — his cars. 

“The 65-year-old was seen taking his Mercedes-Benz SLS AMG for a spin with a friend in Brentford, Los Angeles.” [They mean Brentwood.]

What an eco-phony. As governor, Arnold strapped on the state the jobs-killing AB 32, the Global Warming Solutions Act of 2006.

And SB 375, which Arnold signed in 2008, forces people into tiny high-rise apartments and onto public transportation.

Yet he’s tooling around town in an SLS AMG! And he lives in the massive “Arnold Compound” in Brentwood. While his recently divorced wife, Maria, herself an eco-fanatic, lives in another massive compound somewhere.

The Mercedes SLS AMG gets gas mileage of 14 mpg city and 20 mpg highway.

Compare that to a Prius Plug-In, which gets 50 mpg city and 90 mpg highway — 4.5 times as much per gallon.

If Arnold were not a hypocrite as massive as his steroid-ballooned biceps once were, he would drive a Prius, not an SLS AMG. Better yet, he would follow his own SB 375 edict and take public transportation — or walk.

By Laer Pearce

In The Great California Exodus: A Closer Look, the Manhattan Institute has chronicled California’s fall from “the state with more jobs, more space, more sunlight, and more opportunity” to, well, the state with more sunlight.

In documenting the 3.4 million people who left the state in recent years — that’s just about enough to double the population of Oregon — the study identifies three reasons why California has been transformed from a “pull in” state to a “push out” state. Of course, one reason is the state’s pathologically unfriendly treatment of business. The second is the related collapse of its state and municipal finances. The third reason is less familiar to most, and shows just how good California has become at inflicting economic wounds upon itself.

It’s the state’s high density. While less than 6 percent of the state’s landmass is developed — about 50 percent is government-owned and about 45 percent is agricultural — to most Californians, it feels like a very crowded state.

In my home of Orange County and neighboring Los Angeles County, the density is hovering just below 7,000 people per square mile.  That makes the LA/OC megalopolis the most densely populated metro area in the country. San Francisco/Oakland is second, and San Jose is third. New York City is fourth, with a meager 5,319 people per square mile. Chicago is 25th.  Of the 50 densest metro areas in the country, 20 are in California.

It shouldn’t come as a surprise that, when places get too crowded, people (including business owners) move if they have the chance. In the late 19th century, America’s largest cities had densities of 50,000 or even 100,000 people per square mile.  When streetcars and trains, then cars, opened the door to suburbia, urban densities plummeted. Philadelphia is a case in point; its density fell from 56,000 people per square mile to 12,000 during those years.

As California’s expensive coastal counties started getting uncomfortably crowded in the 1990s, many moved one or two counties to the east to get more room for less.  Of course, those are the very areas that were the hardest hit by the housing and job market collapse. So now they are the California counties losing the most people to other states.

Higher density

What is progressive California doing about this? It should come as a surprise to no one that it’s doing exactly what it shouldn’t be doing:  Crusading Sacramento bureaucrats are forcing higher density on everyone.

The tool of this latest round of madness is 2008’s California Sustainable Communities and Climate Protection Act, or SB 375, authored by Darrell Steinberg, D-Sacramento, now the Senate president pro-tem. SB 375 stepped up California’s regulatory game from just controlling every aspect of how houses are built to dictating where they can be built.

The law mandates regional sustainable growth plans, and definitely doesn’t include suburbia in the “sustainable” column.  The Brown administration is using it like a hammer in its Quixotic campaign to single-handedly free the world of global warming.  For example, Attorney General Kamala Harris recently sued San Diego under SB 375 because its long-range plan did too much for highways, the transportation system that supports suburbia, and not enough for mass transit.

More to the administration’s liking is the Bay Area’s “Initial Vision Scenario for 2035,” which proclaims that, by 2035, the Bay Area’s population will grow by 2 million people, yet there will be fewer cars there than there are today.  That will only happen if yards, tree-lined streets and a car commute to work are traded in for lofts by the train station.

But, as the Manhattan Institute study illustrates, when faced with a choice between already too-dense cities and less dense (demographically and politically) places like Arizona, Texas, Oregon or Utah, more and more Californians are opting out of the craziness.

A number of years ago, New Republic senior editor Gregg Easterbook wrote, “Sprawl is caused by affluence and population growth, and which of these, exactly, do we propose to prohibit?” California’s Progressive leadership has apparently chosen both, firing one more shot into its suffering economy in the process.

Laer Pearce is the author of the new book, “Crazifornia: Tales from the Tarnished State.” Portions of this column are excerpted from the book.

By Wayne Lusvardi

For decades, about 170 cities across California have been mandating that developers overprice about four out of five new housing units by as much as $148,000 per unit to exclude truly affordable housing from their communities.  The legal mechanism they have been doing this with has ironically been called “inclusionary housing.”

But this municipal bunko game has recently been exposed for what it really is in a court of law and was overturned.  Back on May 24, 2012, Santa Clara Superior Court Judge Socrates Peter Manoukian ruled San Jose’s inclusionary housing ordinance was invalid.  San Jose was forced to revise its inclusionary housing laws in 2010 after the California Court of Appeal prohibited the City of Los Angeles from enforcing its affordable housing ordinance in 2009 in the case of Palmer/Sixth Street Properties versus City of Los Angeles (175 Cal. App. 4th 1396).

In the San Jose case, the local Superior Court concluded what has been obvious to everyone except those political elites and special interests who benefitted from the law.  For decades, about a third of California’s cities and counties had been deliberately overpricing some 80 percent of newly built housing under the guise of mandating 20 percent of its new housing for affordable buyers and renters. In San Jose, developers were mandated either to set aside about 15 percent of new-built housing units for low-income households, or pay an in-lieu fee of about $122,000 per unit.

No “Nexus” Between New Housing and Non-Affordability

The court ruled that the inclusionary housing law in San Jose failed to provide “a legally sufficient evidentiary showing to demonstrate justification.” San Jose’s inclusionary housing ordinance failed to provide any reasonable connection — called a “nexus” in legal language — showing that inclusionary housing fees related to any increased community need for subsidized housing as a result of building new market-rate housing.  The court case citation is California Building Industry Association versus City of San Jose, No. 1, 10, CV 167289.  Even the American Civil Liberties Union filed a brief on Aug. 2 in support of the Building Industry Association’s subsequent similar case against the City of Santa Rosa.

The Building Industry Association conducted a “nexus” study that found inclusionary housing fees added $20,000 to $148,000 to the price of each new housing unit. Real estate developers have had to jack up the price of the other new housing units by 5 to 19 percent to pay for this “exaction” — a term meaning legal extortion.

In the past, cities have been able to get courts to validate this swindle by only focusing on the proverbial tree instead of the forest.  In other words, cities were successful in getting courts to only look at the lack of construction of brand new affordable housing units, not the price of all new housing.  The larger price exclusion of truly affordable housing as a result of the inclusionary housing law was never looked at.

The courts apparently were never asked in the past to rule on whether raising the prices of 80 percent of all new-built housing far above market prices was really pricing the bulk of moderate-income buyers out of the housing market. Inclusionary housing is really a way to exclude most true market rate housing out of communities while throwing a bone to low-income housing.

Inclusionary Housing Is Way to Get Around Prop. 13

It is also a way to get around the restrictions for property tax reassessments under Proposition 13, the 1978 tax limitation initiative. By pumping up property tax assessments, cities could pay lavish retirement plans for unionized municipal employees.  And as the property tax base rose, cities had even more money to purchase open space around exclusive hillside homes to stop more new housing development.  By enhancing the view premiums of hillside homes, the property tax base could be increased all the more.

Open space conservancies became a racket to shake down vacant hillside landowners in order to enhance the values of greedy surrounding homeowners under the guise of environmental preservation.  It even evolved to the point that cities could invoke eminent domain to buy open land for its lowest use, even though the eminent domain code specified property had to be appraised for its highest use.

Inclusionary Housing Created Local Housing Bubbles

What resulted was a local housing “bubble” having nothing to do with sub-prime or zero down payment home loans.  Cities with inclusionary housing laws were not any more morally superior than the proverbial Wall Street “banksters” who made out like bandits with sub-prime loans.

In the past, cities have contended that no brand of new affordable housing was being built in their cities.  They alleged that new housing construction was excluding low- and moderate-income homebuyers.  But what inclusionary housing laws really did was change the definition of affordable housing from older, obsolescent housing to brand new housing.  Previously, affordable housing was considered to be in areas with older housing stock. What partly made housing affordable was that it was not compliant with newer building codes and modern design standards and tastes.

Market Housing Ladder as Solution

What creates truly affordable housing is the housing price ladder in a process called the “move up market.” This is a process whereby “move up” buyers wanting larger or newer homes buy brand new homes.  The older homes they sell can then be purchased by the next income level of homebuyers and so on down each step of the housing affordability ladder.

As each level moves up into better housing, the housing at the bottom price rung then becomes affordable to low- and moderate-income households.  In other words, if you want to create affordable housing, then build new housing that will end up creating low-cost housing at the bottom of the price ladder. But inclusionary housing allowed first-time homebuyers to jump to the top of the housing ladder and get new luxury housing to boot.

What stopped the music in the game of musical chairs of inclusionary housing was the shut down of all redevelopment agencies in California in order to plug the state budget deficit.  Twenty percent of all property taxes from redevelopment went toward affordable housing.  Without redevelopment subsidies to non-profit low income housing agencies and for-profit affordable housing builders, inclusionary housing has unraveled.

Patronage and Corruption Are Impeding Economic Recovery

Inclusionary housing has existed without being overturned for so long because it created a wide base of political patronage across political boundaries.  The powerful realtor lobby wouldn’t oppose it because it created a local housing bubble that raised all housing values in a community.  The building industry initially opposed such laws.  But courts repelled their challenges. Builders had to play along with the game of inclusionary housing until the plug was pulled on redevelopment subsidies.  Non-profit low-income housing agencies obviously wouldn’t oppose it because of the artificial jobs it created.

Likewise, state planning bureaucrats that mandated each city approve an affordable “Housing Element” in their General Land Use Plans wouldn’t have opposed it because it created their jobs.  Who cared if inclusionary housing was really exclusionary housing?  If there were enough artificial jobs and patronage to go around, everyone would myopically justify inclusionary housing out of their own self-interest. Those who drank the inclusionary housing “Kool-Aid” became too drunk to see the program for what it was.

Inclusionary Housing Furthers Urban Sprawl

Ironically, inclusionary housing created what is called the “push down-pop up” housing market in Southern California.  If you “pushed” truly affordable housing out of older cities along the California coastline in politically “blue” areas, that market would “pop up” in politically “red” inland areas.

Families that couldn’t afford to buy in upscale Pasadena with its high inclusionary housing and parks fees would end up buying in Rancho Cucamonga or Fontana in San Bernardino County.  So inclusionary housing was fueling “urban sprawl.”  But when the state legislature passed an anti-urban sprawl law — SB 375 in 2008 — they made no attempt to repeal inclusionary housing laws in what are called “general law” cities across the state. General law cities operate mainly according to rules laid down by the Legislature.

Then there are charter cities, which have more autonomy in writing their own laws. They could pass their own inclusionary housing laws without the concurrence by the Legislature.

Deregulation is Solution

What the inclusionary housing law fiasco has taught us is that, for there to be an economic recovery, California must deregulate many of its laws.  Unemployment is mainly a local government problem, not a problem that can be cured by mere state or national policies.  What is impeding a housing-market recovery in California is not just “underwater mortgages.”  It is local inclusionary housing ordinances and the whole state bureaucratic apparatus of affordable housing mandates.

Local communities like San Jose may soon realize that repealing inclusionary housing ordinances can create real tax-generating jobs.  In turn, this will likely trigger a horse race in each community to do likewise, or eventually local politicians will not be re-elected.  Unions may be able to buy legislators, but jobs buy votes of the electorate.

Currently, local governments in California are desperately exploring highly risky solutions to re-ignite the housing market to bring about an economic recovery.

San Bernardino is exploring using eminent domain to buy out the excess portion of over-mortgaged loans.  If housing prices drop further, or the courts rule that the county must also pay damages to lenders for cherry picking the best loans from their loan portfolios, San Bernardino could be left with an even deeper hole to dig out of.

The Poway Unified School District in inland San Diego County is issuing highly risky “capital appreciation bonds” that run the risk of sucking all the equity out of home values today in return for a stagnant real estate market in the future.  It is probably not coincidental San Diego County has a quarter of all affordable housing mandates in California.  The only exception in San Diego County is the city of Escondido, which is Republican.

The building industry association is leading the economic recovery, not corrupt school districts or cities wanting to bail out local communities with risky bonds and eminent domain of over-mortgaged homes.

Instead of risky bonds or socializing mortgages, California should look to repealing all of its affordable housing mandates across the board to restart the move-up housing market again.  But this has almost no chance of happening as long as self-serving unions, bureaucrats, non-profits and politicians remain as obstacles to the private market.  What politician would dare cross the unions that have bought and paid for their votes?

Unemployment is a local problem

So unemployment will remain mainly a local problem that is mostly blamed on outside forces such as Wall Street, a Republican-controlled U.S. House of Representatives or the powerless Republican minority in the California legislature.  As long as Democrats can divert attention away from the jobs-sucking machine of inclusionary housing, they will remain in political favor.  But how long will it be before realtors, retailers, industries and low-and-moderate income homebuyers form a coalition to meaningfully deregulate housing laws and other regulations in order to bring about an economic recovery for everyone?

Of course, there will be many phony political reform efforts funded by the unions and the Democratic Party to confuse voters, just as there are now.  But how long can that continue before even Democratic voters see the obvious: inclusionary housing was really exclusionary housing that created local housing bubbles that have priced housing out of reach of the working and middle class?  Sub-prime loans were a way to get around this local price bubble by making cheap money available to unqualified buyers.  That ruined the value of our currency and imperiled the U.S. internationally.  What started out as a local affordable housing program ended up ruining the national banking system and the economy.

As the saying goes, “All politics is local.”  And so is our current managed Depression. Solutions can mostly be found at the local level.  The courts — the only half-uncorrupted branch of government in California — apparently are the only way to overcome the political sclerosis of inclusionary housing and bring about an economic recovery.  The overturning of local inclusionary housing laws may portend a significant change in favor of free markets and an economic recovery.

By Wayne Lusvardi

When did the California Dream begin?

Peter Huck, a refugee journalist from Los Angeles to New Zealand, has an answer. He writes in the July 20 issue of the New Zealand Herald newspaper “Sustainability Reinventing California Dream” that the California Dream began when Los Angeles Department of Water and Power’s William Mulholland said at the 1913 opening of the California Aqueduct: “There it is, take it.”

Huck believes that “sustainability” will lead to an economic recovery in California.

But the California Dream may have ended with California’s Anti-Sprawl Law, Senate Bill 375, which Huck champions in his article as an economic stimulus to get the state out of a managed depression.

More recently, the County of San Bernardino in California has proposed to use eminent domain to condemn mortgages on “over-mortgaged” homes.  The county would do this by spreading about 30,000 over-mortgaged loans to all 699,000-property owners in the county by way of additional property taxes.

If there is a new slogan for California nearly 100 years after Mulholland’s epic statement, it is: “Socialize losses and privatize gains.”  Which is another way of saying: “Everyone wants out of bubble-created debts, but no one wants to pay for them except through more bubbles.”

Yet no one in San Bernardino has apparently realized that reducing the over-mortgaged portion of home loans will just lower assessed property values and drastically reduce property tax revenues.  Mass delusion is starting to spread across desperate California just as the Tulip Bulb Mania, the South Seas Bubble and the Mississippi Bubble followed the debt bubbles of the 1700’s in Europe and early America.

“Sustainable” Transit Will Result in Unsustainable Water

Having handled land use for a regional water agency in California for 20 years, I find that Huck has focused on the ideological level of explanation, rather than the empirical.

Contrary to Huck, steering population and housing into coastal cities in California will result in an unsustainable use of water resources.  Infill housing near urban job centers may result in fewer auto emissions from auto commuting.  But diverting population growth to dense urban cities will also force greater reliance on imported water supplies from the Sacramento Delta and the Colorado River.  California’s cities depend on groundwater for about one third of their water during dry years.

What has historically made water valuable in California has been the relative cheapness of water from urban groundwater basins compared to expensive imported water.

The anti-sprawl law will require that cities adopt sustainable growth plans to shift new development from the urban fringe, where groundwater resources are more abundant, to highly dense urban areas, where local water supplies are patchy and often polluted from war time industrial toxic wastes.  It would take decades, if ever, to clean up polluted urban groundwater basins.

Viewing a map of groundwater basins and a map of housing density for California indicates that water and populations are not geographically proximate. The densest populated areas are mostly along the coast while most groundwater resources are inland.

Moreover, by virtue of shifting to reliance on imported water supplies, California will need to buy more imported electricity to pump that water to urban centers located far from the sources of water.  Will expensive Green Power mostly be used to pump water long distances?  Or will Green Power be dedicated to powering the proposed California High-Speed Rail Authority?

Solar power can only be used in mid-to-late daytime; while wind power mostly peaks at night.  But neither can be relied on for non-peak load power uses — homes, industries, hospitals, and public transit — because they are unreliable and thus unsustainable.

How Cal Energy Crisis Resulted in “Sustained” Drought

In 2001, this writer was a member of an Energy Crisis Task Force for a large regional government water utility.  The original cause of the California Energy Crisis of 2001 was the 1996 Federal Environmental Protection Agency “mandate” to California to clean up urban smog by 2001 or face a cut off of highway and education funds.

The only way to comply with the federal mandate was to shut down old polluting fossil-fuel power plants along the California coast owned by Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison companies.  Then these obsolescent power plants had to be divested to private operators and converted to cleaner natural gas fuel power plants.

California was not running out of energy in 2001; it was running out of clear sky.  The real crisis was not energy, but how to pay off the old stranded or “underwater” mortgages — called corporate bonds — on the mothballed power plants. Everybody wanted smog eliminated, but no one wanted to pay for it.  Federal environmental policy became “clean air at any cost.”

The initial energy crisis solution in 2001 was to give a quasi-monopoly to natural gas suppliers, mainly in Texas, to try to pay off the bonds on the old power plants. This policy was erroneously called “deregulation,” which failed. The plug was pulled on deregulation by the Democratic legislature and governor and replaced with a system of energy price caps.

Retail electricity prices were eventually capped; but wholesale energy prices were not resulting in an induced energy pricing fever. This bubble in energy prices was intentionally created to pay off the unpaid mortgages on the mothballed power plants.  But it also failed miserably and even resulted in some fatalities.

Finally, some $42 billion in mortgages were paid off by energy price premiums loaded into long-term energy contracts mainly to run the pumps for the California State Water Project.  Smog reduction was paid for by inflated water rates.

By 2007, a man-made drought resulted from an environmental lawsuit to protect the purportedly endangered Delta Smelt fish in the Sacramento Delta. In 2010, an appeals court ruled that the allegation that the Smelt was endangered was bogus.

By manufacturing a drought, California not only protected a bubble in water rates that securitized the pay off of long-term bonds to reduce smog, but also brought about even higher water rates. These higher local water rates have not been repealed anywhere in California after the court-ordered drought was ended in 2010.

California Politician’s Dream Come True: “Taxation without Representation and Limitation”

Loading the cost to clean up the air into water contracts avoided having to go to the California Public Utilities Commission for an electric rate increase, to the Legislature for a tax increase, or to the voters for the approval of a tax increase, as required under Proposition 13.  To politicians, it was a California Dream come true: ”taxation without representation and limitation.” But it led to economic stagnation.

Long-term water contracts expire in 2013, when AB 32, the California Global Warming Solutions Act of 2006, kicks in.  In other words, in 2013 California will no longer pay premiums loaded into the price of water to pay off the cost to reduce smog.

But a replacement premium will be added to electricity rates to pay for the mandatory shift to expensive Green Power.  Solar and wind power located in remote areas is supposed to reduce urban air pollution but will add transmission costs.

This will prevent the building of new conventional power plants in urban areas where smog is trapped in urban air basins.  It isn’t solely pollutants that cause smog, but the trapping of pollutants in air basins.  The solution to pollution is dilution and dispersion — not anti-sprawl legislation that will concentrate more people in dense urban air basins who will travel to work in bullet trains subsidized by Cap and Trade taxes disguised as a pollution emissions market.

Moreover, back up conventional power plants will have to cycle up and down as the sun shines or clouds cover the sun and the wind gusts. Power-plant “cycling” will cause more air pollution as surely as pushing your gas pedal up and down constantly in your car or frequently moving your home thermostat will do the same.

The California Energy Crisis of 2001 ended up loading the huge cost to reduce smog into premiums in water rates.  That, in turn, resulted in the necessity of an artificial drought.  Instead of building more dams, reservoirs and pipelines, the only way left to manage water supplies was by conservation. California had to protect its water-rate bubble, and thus had to squelch any new water development or water markets for over a decade.  It needed a “sustainability” ideology to legitimate its conservation policy.  “Sustainability” is just public “hucksterism” if you will forgive the pun.

California may finally put an $11 billion water bond on the election ballot in 2014, coincidentally after the bonds on the California Energy Crisis of 2001 are paid off.

The Solution to Bubbles is Not More Bubbles

In Michael Lewis’ pop economics book, “Boomerang: Travels in the New Third World,” he describes the blowback from Greece’s debt-created bubble.  All Greeks wanted the national debt reduced, but nobody wanted to pay for it.

Greece tried to load its unpaid national debt into electric power rates.  This only resulted in ratepayers refusing to pay their electricity bills and falling revenues for the state utility agency.  The result was power blackouts, disinvestment by the bond market and social and political destabilization.  Should we expect anything less from California’s loading of the cost to reduce air pollution in water rates securitized by water conservation and legitimated by a “sustainability” ideology?

Contrary to Peter Huck, a “sustainability” ideology will not result in an economic recovery for California. The future of California’s economy is more likely to be slow growth due to having to pay down the private sector mortgage-debt bubble and the public sector’s pension, redevelopment and air quality-water rate bubbles.

Creating new tax bubbles by condemning “underwater” mortgages, by Cap and Trade “tax farming,” and by inflating Green Power rates, will only assure the older bubbles will be replaced with new ones.  California band musician Lawrence Welk famously invented “the Bubble Machine.” But perhaps comedian Stan Freberg was prophetically right when he recorded his spoof of the Lawrence Welk Show by saying it was time to “turn off the bubble machine?”

By John Seiler

The second most poweful politician in California is Senate President Pro Tem Darrell Steinberg, D-Sacramento; after Gov. Jerry Brown. Steinberg’s background is with labor unions. And he represents the state capitol — that is, state workers whose jobs, wealth, perks, pensions and power depend on having the biggest, highest-taxing, most-regulating and most-bullying government possible.

Today he detailed his political philosophy in a letter to the Wall Street Journal. He was responding to a Journal article attacking SB 375, the 2008 bill that he sponsored, and which then-Gov. Arnold Schwarzenegger signed into law. According to a summary by the Southern California Association of Governments, which implements much of the bill, SB 375:

“SB 375 (Steinberg) is California state law that became effective January 1, 2009. This new law requires California’s Air Resources Board (CARB) to develop regional reduction targets for greenhouse gas emissions (GHG), and prompts the creation of regional plans to reduce emissions from vehicle use throughout the state. California’s 18 Metropolitan Planning Organizations (MPOs) have been tasked with creating ‘Sustainable Community Strategies’ (SCS). The MPOs are required to develop the SCS through integrated land use and transportation planning and demonstrate an ability to attain the proposed reduction targets by 2020 and 2035.”

Steinberg began his letter:

“More unmitigated sprawl, more smog, more cars on our already congested freeways—is that tarnish what Californians really want to see for the future of the Golden State?”

What contempt he has for regular, middle-class families:

* By “More unmitigated sprawl” he means nice suburbs in which to raise families, instead of the high-rise projects he want to shove us into like ants.

* “more smog” is a red herring. Smog from cars has dropped more than 95 percent in 50 years, and keeps declining as cars get cleaner.

* “more cars” means individual freedom of transporation, instead of being squeezed into uncomfortable buses or mass transit that takes three or four times the minutes to get someplace. In any case, cars are here to stay. SB 375 won’t change that much. And does Steinberg take mass transit?

* “already congrested freeways” are congested because, beginning with Gov. Jerry Brown’s “era of limits” administrations in the 1970s and early 1980s, the state has not built enough roads, instead wasting highway funds on mass transit, or general-fund pork. Moreover, the easy way to relive congestion is to privatize the freeways, which then would become toll roads charging more during rush hours.

Contradiction

Steinberg wrote:

“Wendell Cox, in his April 7 Cross Country [article in the WSJ]: “California Declares War on Suburbia,” indicates that’s a favorable path, while mischaracterizing the intent and impact of a bill I authored in 2008 that will provide California residents exactly what they want: more housing options, greater access to public transportation, shorter commute times and an average savings of $3,000 per household per year on transportation and energy costs.”

Ever hear of a government program that saved money? And notice the “will provide California residents exactly what they want.” But Steinberg contradicted himself in the very next paragraph:

“The California Sustainable Communities and Climate Protection Act (SB 375) is a rational approach that serves as a blueprint for other states on how to turn inevitable growth into smart growth. Its provisions provide regions with a thoughtful framework to minimize expanding development, relieve roadway congestion, provide housing and working alternatives to Californians confounded by gridlock, and improve air quality. That is why it earned the support of a broad coalition including the California Building Industry Association, the League of California Cities, the California State Association of Counties and environmental and affordable housing advocates.”

By “rational approach,” he didn’t mean you decide, rationally with your family, where and how you will live. He meant “rational” in the sense used by political philosopher Michael Oakeshott in a famous essay, “Rationalism in Politics.” In that sense, “rationalism” means an ideological scheme that is not based in reality. In one summary, “Oakeshott argues that the rationalist, in awarding theory primacy over practice, has gotten things exactly backwards: The theoretical understanding of some activity is always the child of practical know-how, and never its parent. In fact, he sees the dependence of theory on practice as being so unavoidable that not only is the rationalist incapable of skillful performances guided solely by theory, he is not even able to stick to his purported guidelines while performing poorly.”  

In housing, “rationalist” projects are the Cabrini Green housing projects in Chicago, which were supposed to bring nice living conditions for poor folks, but ended up being gang- and crime-infested, and were torn down. Another “rationalist” project is the whole city of Detroit, which has been run by Steinberg-like liberals for 60 years, has lost half its population and is a byword for urban disaster.

Consider again this sentence of Steinberg:

“Its provisions provide regions with a thoughtful framework to minimize expanding development, relieve roadway congestion, provide housing and working alternatives to Californians confounded by gridlock, and improve air quality.”

That’s pure, controlling, elitist “rationalism”:

* “minimize expanding development” means destroying your property rights to build a house where you wish, with your own money, after paying a market price to a willing seller.

* “relieve roadway congestion” doesn’t mean private toll roads, but slamming you into a crowded bus.

* “provide housing” means forcing you into Cabrini Green-style projects.

* “working alternatives” means government dictates not only where you live, but where you work. Assuming you even have a job in a state where Steinberg, Schwarzenegger, Gov. Jerry Brown and others have spent a decade destroying jobs.

He continued:

“That is why it earned the support of a broad coalition including the California Building Industry Association, the League of California Cities, the California State Association of Counties and environmental and affordable housing advocates.

But these supporting groups he listed are either a building association in tight with the government and eager to get political contracts in an ultra-politicized state, government entities or ideological activists wanting a piece of the manipulative action. Naturally “environmental…activists” would support SB 375, because it advances their goal of making the earth a nice nature preserve without any people.

And get this. He wrote:

“Housing choices and preferences are changing, and those who imply otherwise have their heads in the sand. Market research reported in this paper just last year reveals a shrinking market demand for single-family homes.”

Yes, that’s because people are broke from the anti-jobs policies impose by him and such Republicans as Schwarzenegger. You can’t live in a nice, single-family home home if you’re standing in an unemployment line.

Steinberg:

“Yes, SB 375 incentivizes higher densities, but it uses a carrot, not a stick.”

Right. It uses a giant carrot to hit people over the head.

Steinberg:

“And while developers content with their standard formula for sprawl may hem and haw, the fact is that people who want single-family homes will always be able to find them.”

Yes, if they’re rich. That’s a point I have been making, as has Joel Kotkin.

Steinberg even said:

“The general belief that smart growth policies are driving California’s people and business investment to other states is just plain wrong. The numbers don’t lie. The National Venture Capital Association and PricewaterhouseCoopers recently reported that California gained $14.5 billion in venture capital last year. That’s more than half of the country’s $28 billion in venture capital investments and almost five times the amount of the second-ranked state of Massachusetts. And while people relocate for any number of reasons, California’s population has increased 10% from 2000 to 2010, according to the U.S. Census Bureau.”

That’s a bait and switch. We get so much venture capital because computer nerd geniuses keep coming to Silicon Valley with companies like Facebook; or start them there. But if your IQ is lower than 160, forget it. As Joseph Vranich has reported, businesses keep exiting California at record rates. That’s why the state unemployment rate rose in March, to 11 percent statewide.

As to the state’s population growth of 10 percent, that was the lowest decade-over-decade performance in the state’s history. As recently as the 1990s, growth was 25.7 percent. The growth the past decade mainly was from other countries. But now even that has ended, as Mexicans are fleeing unproductive California of Steinberg-Brown-Schwarzenegger for the booming, pro-growth Mexico of Presidente Felipe Calderon.

Steinberg concluded:

“California is a desirable place to live and our population will continue to grow. We’re diverse, innovative and our economy is good at producing high-wage jobs.”

Just not many of them.

California will not have the “smart growth” future Steinberg promises because it won’t have any growth at all.

April 28, 2012

By John Seiler

California is just for rich folks now. If you’re middle class, I suggest getting out. If you’re poor, you can get EBT cards, Section 8 housing, etc., but then you’re hooked into the government system.

Some of my previous posts on this topic raised the hackles of some readers, especially when I blamed Peter Douglas, the late head of the California Coastal Commission, for much of the attack on the middle class. He and his rich, elite buddies, such as ex-Gov. Arnold Schwarzenegger and Gov. Jerry Brown, have imposed laws and regulations that keep safe their cozy arrangements and drive up the value of their property, but make California property prohibitively expensive for the rest of us, especially for families.

The problem is that free societies are based on the middle class. All societies have elites. Even the Soviet Union, advertised as a perfectly egalitarian society for “the workers,” in fact allowed the bosses to live in luxury undreamed of by Warren Buffett. Stalin and his socialist elite comrades dined on caviar and imported wines while the masses starved to death by the millions. They lived in the palaces and the dachas of the executed Tsar, while tens of millions of Russians huddled in hideous high-rises — just the blueprint the Douglas-Brown-Schwarzenegger elite has in stock for us under SB 375. Read “Stalin: The Court of the Red Tsar” if you want to see how Stalin ruled, and how we will be ruled.

The Elite still can afford to live here, as shown by a flyer in my morning Orange County Register for Lambert Ranch in Irvine, “From $900,000, Nine Model Homes.” (Picture above.) A home model called “The Grove at Lambert Ranch” is advertised as “Sloping upward and gazing across Irvine. Amid stands of eucalyptus trees. 4,278 — 5,182 square feet. Up to 6 bedrooms/6.5 baths.” Today is the Grand Opening.

Only the “1 percent” — and above — can afford these kinds of digs.

I don’t begrudge rich people homes like this. If they got their money honestly, which most have, then more power to them.

But this is the only type of homes now being built in coastal California.

With no middle class, there’s no free society. There’s just an elite that pushes everybody around while doing what it wants (Douglas, Arnold, Brown, etc.), a small middle class, mostly made up of government workers, and a large proletariat that’s unorganized, repressed and can’t accumulate the capital (as in free societies) to climb into the middle class or higher.

April 23, 2012

By John Seiler

A couple of weeks ago Peter Douglas died. For 25 years he was the head of the California Coastal Commission. In an article, I pointed out that he was an elitist who was obsessed with hyper-regulating California for the enjoyment of elitists like himself — all under the guise of happy-slappy environmentalism. The result was the that the middle-class effectively was banned from owning property anywhere near California’s beautiful coasts.

Many commentators responded:

“Are you that jaded that you couldn’t wait his grave is cold to speak ill of the dead?…. You deserve ZERO.”

“This is completely unprofessional. You should be ashamed of yourself.”

“This is completely insensitive.”

“This is a cowardly post John. Very fitting of your character if you ask me.”

“Thank you,  John.  Guess you aren’t in the decency business either. There is just no limit to where you go and what you will say to make a political point.”

To quote Orange County native Steve Martin:

Fortunately, demographer and “Truman Democrat” Joel Kotkin has made similar points to what I did. Kotkin even voted for Gov. Jerry Brown in the 2010 election. Kotkin is an old-style liberal Democrat who is concerned about the working people of California — the old middle class that’s being driven into poverty our out of the state. He has nothing but disdain for the elitists.

Adios, Taxifornia

Here are some excerpts from a recent interview:

“as Mr. Kotkin notes, Californians are increasingly pursuing happiness elsewhere.

“Nearly four million more people have left the Golden State in the last two decades than have come from other states. This is a sharp reversal from the 1980s, when 100,000 more Americans were settling in California each year than were leaving. According to Mr. Kotkin, most of those leaving are between the ages of 5 and 14 or 34 to 45. In other words, young families.

“The scruffy-looking urban studies professor at Chapman University in Orange, Calif., has been studying and writing on demographic and geographic trends for 30 years. Part of California’s dysfunction, he says, stems from state and local government restrictions on development. These policies have artificially limited housing supply and put a premium on real estate in coastal regions.”

That’s the point I made in my article on Douglas. In particular, Douglas’ CCC (whose initials are a lot like CCCP) made coastal development almost impossible. In Huntington Beach, some local developers spent 35 years trying to put up housing projects. At first, they wanted to put up regular middle-class neighborhoods that most folks could afford. (A similar development was put up there a few years earlier in 1970, with houses selling for $20,000.)

The CCC nixed that.

The developers came back with a proposal for housing that was less dense — and more expensive.

The CCC nixed that too.

On it went. Until about three years ago, when the CCC finally approved the development. Here it is: The Bungalows at Pacific Shores gated community. I drove over there and looked around. The sales lady said the cost for the home I checked was $1.2 million. Times are tough, so you probably could steal it for $1.1 million.

The Website enthuses:

“Imagine waking up every day at the beach. That’s the essence of the Pacific Shores lifestyle. Surfing, swimming and sunbathing on the sand are all just a short three-block walk from the community. And all of the other attractions that have made Huntington Beach famous – the world-renowned pier and the shops, restaurants and nightlife along Main Street – are only minutes away. At Pacific Shores, you’ll be surrounded by the unique coastal culture that has earned Huntington Beach renown as Surf City USA.”

That’s a lifestyle once enjoyed by California’s middle class. Now, thanks to the late Douglas limiting the coast to himself and his rich, elitist friends, the coast can be enjoyed only by the “1 percent” — or maybe the “0.1 percent.”

Notice in the picture how one of the housing styles is called “Plantation.” That’s appropriate. The Elite, whose fortunes the late Douglas promoted, lives on a plantation — and you’re the taxpayer-slave who lives in a shack.

Back to Bakersfield

Sure, you still can live in Bakersfield and drive a couple of hours to the beach, and buy a year-round state parks pass for $195. But the pass price and the high cost of gas, averaging $4.17 a gallon today in California, is going to make that really expensive. Better take a bath and put Merle on the iPod:

Let’s get back to the Kotkin interview:

“‘Basically, if you don’t own a piece of Facebook or Google and you haven’t robbed a bank and don’t have rich parents, then your chances of being able to buy a house or raise a family in the Bay Area or in most of coastal California is pretty weak,” says Mr. Kotkin.

“While many middle-class families have moved inland, those regions don’t have the same allure or amenities as the coast. People might as well move to Nevada or Texas, where housing and everything else is cheaper and there’s no income tax.”

Then there’s AB 32, the Global Warming Solutions Act of 2006. It was signed into law by then-Gov. Arnold Schwarzenegger to give him a legacy, which he’s now exploiting on his globetrotting for extreme environmentalism. It was supposed to encourage other states and countries to follow suit by killing their industries for absurd reductions in greenhouse gas emissions. But nobody is following California into economic folly.

The main result is that AB 32 will kill 1 million jobs.  It doesn’t matter to Arnold, who is worth $700 million, a fact that came out last year when his wife filed for divorce after it was revealed that Arnold was promoting global warming with the family maid. (Or half that, if Maria goes through with the divorce.)

Since he signed AB 32 in 2006, even the term “global warming” has been frozen out by environmentalist fanatics, who now use the term “climate change” — a nebulous phrase that could mean anything, and does.

Arnold also signed into law the lesser known SB 375, whose aim is to jam poor and middle-class Californians, ant-like, into high-rises, while Arnold and the others in the mega-millions Elite frolick in the depopulated coastal areas.

The ‘new regime’

Kotkin interview:

“And things will only get worse in the coming years as Democratic Gov. Jerry Brown and his green cadre implement their “smart growth” plans to cram the proletariat into high-density housing. “What I find reprehensible beyond belief is that the people pushing [high-density housing] themselves live in single-family homes and often drive very fancy cars, but want everyone else to live like my grandmother did in Brownsville in Brooklyn in the 1920s,” Mr. Kotkin declares.

“‘The new regime’—his name for progressive apparatchiks who run California’s government—’wants to destroy the essential reason why people move to California in order to protect their own lifestyles.'”

“Housing is merely one front of what he calls the ‘progressive war on the middle class.’ Another is the cap-and-trade law AB32, which will raise the cost of energy and drive out manufacturing jobs without making even a dent in global carbon emissions. Then there are the renewable portfolio standards, which mandate that a third of the state’s energy come from renewable sources like wind and the sun by 2020. California’s electricity prices are already 50% higher than the national average.”

So, is there a solution for the survival of the California middle class?

Yes. Click here.