On Beavers and Bailouts

This past week started off bad and only got worse. Financial institutions that had been a part of the fabric of America unraveled before our eyes. Suddenly words like bailout, buyout and takeovers, words that are an anathema to most capitalist’s ears became the bitter pill we all had to swallow. I imagine a collective gasp was heard throughout the land when we learned on Friday that the price tag came in at $700 billion.

I am not going to be drawn into a finger pointing exercise here; I believe there’s plenty of blame to go around: from the Democrats who promoted home ownership to a broader constituency; to the Republicans who were too lax in their hands off approach to market regulation, no one walks away from this mess with clean hands. Not even the consumers who sold themselves their own bill of goods by knowingly buying a home they couldn’t afford. Now the entire country is left holding the bag on these mortgages.

Yes $700 billion is quite a chunk of change, but then so is the $850 billion (up from $212 billion in 1990) Americans carry in credit card debt. The numbers are ugly, even if you break them down to the ridiculous, (a tactic used in sales) the feds proposed bailout will cost each man, woman and child $2320 (2007 census bureau US pop. est. of 301,621,157).

While this week’s news from Wall Street was disquieting what I find even more disquieting is the ease with which we’ve become comfortable with amassing debt. Its one thing to yell and scream about how much the federal government is spending on (insert favorite pet peeve/gripe here) but what about what we’re willing to amass at the local level? When did it become okay to spend like drunken sailors (sorry kids)? After all isn’t that what cities do under the auspices of a ‘redevelopment agency’?

I’ve heard the rationale in favor of the formation of a redevelopment agency; the funds will be used to streetscape, update our sewer systems even create a cohesive look along Main Street. But by far my most favorite rationalization reminds me of when I had three kids in the house, ‘but mom everyone else has one’; maybe, but by now we should all be aware that the only money that’s free is in a Dire Straits song – which you can download from Rhapsody for 99cents.

Since ‘everyone else has one’ I thought I’d see what that looked like on a balance sheet. For that information I went to the State Controller’s site and looked up the 23rd edition of the Community Redevelopment Agencies Annual Report for the fiscal year ended June 30, 2007. I am not quite committed to reading the full 714 page report, yet, but did come away with some interesting nuggets.

For example Concord’s total indebtedness was $144+ million dollars, Pleasant Hill’s $94+ million and Walnut Creek’s $12+ million. Again breaking the numbers down to the ridiculous: Concord’s 120k citizens each owe $1196, Pleasant Hill (pop. 32k) $2894 and Walnut Creek (pop. 63k) $199. I don’t know about Dire Straits but I sure do hear a Beatles song in here somewhere.
Another tidbit had to do with where the money was spent: Redevelopment has provided flood control measures, financed housing for low-income families, assisted in the construction of sports arenas, and operated amusement parks. Property taxes being spent on amusement parks and sports arenas, huh?

But the scariest bit was looking to see how long each of these agencies has been in existence. At first I thought Fresno was the sure fire winner with their agency being formed in the fifties, but then I saw the City of Los Angeles has had a redevelopment agency since 1948.

Apparently redevelopment agencies are even more permanent than permanent open space – and that should scare us all.