Good Times Can't Keep Rolling

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Wednesday, Sept. 26, 2007 | The city of Oceanside, like most local governments, and like most homeowners, enjoyed watching property values rise at an extraordinary clip over the past several years. With the rise, came a frenzy of new construction and home sales, which translated into an increase in tax revenue pouring into Oceanside City Hall.

In 2002, Oceanside collected $18.3 million in property taxes.

In 2006, Oceanside received $48 million.

The city has adjusted to what it could only see as a new reality -- every year the tax base would increase. Next year, for example, new City Manager Peter Weiss said his team is planning for a 10 percent increase in property taxes. The next year, he said, the city should expect a 7 percent increase.

But Oceanside, like most local governments, and like many homeowners, also upwardly adjusted its spending habits over this time period.

Despite the boom, Oceanside's level of reserves remains one of the lowest in the region. A City Council member recently said that the city lives "paycheck to paycheck."

Weiss said he thinks the city's level of reserves is low -- 10 percent -- but that its understandable.

"When the city did have a significant amount of reserves, the City Council decided that rather than sit on all this money, it was time to give some of it back to the community," Weiss said.

Giving it back meant a new senior center, a new park and a new fire station.

At the same time, homeowners in the city were spending as well.

Some were spending too much.

Weiss said his team is watching the housing slump closely but he has no plans to address its potential effects on the city's budget.

"I think it's an issue, but I don't think it's cause for us to overreact," he said.

New non-residential development will help offset any troubles, Weiss said. And although negotiations with employee groups begin again soon, Weiss has no plans to ask for any sacrifices.

Not long ago, Chula Vista had a similarly positive outlook on its economic future. It bragged about the benefits it offered police officers and other employees to lure them away from the city of San Diego, which has been under a cloud of economic doom for some time. Like Oceanside, Chula Vista adjusted to boom times with major spending.

The city added hundreds of new employees, constructed a new City Hall, built a new police station, renovated fire stations and constructed a new park. Like Oceanside, Chula Vista dipped into its reserves to do all this.

Now, Chula Vista financial officials call the situation "bleak." They told voiceofsandiego.org's Kelly Bennett recently that even though the city had seen a 14 percent increase in property taxes last year, this year the city should expect only a 4 percent growth next year and be prepared for even worse.

Chula Vista's newfound appreciation for the fact that things that go up must also come down is welcome. The city's leaders should be commended for understanding better what lies ahead. But they have yet to articulate how they plan to address it.

But other cities like Oceanside have yet to fully comprehend what the housing slump and spike in foreclosures will mean for their coffers. Analysts disagree on the future of the housing market -- whether it will plummet further or simply level off where it is -- but nobody argues that it will enter a boom time again any time soon.

Unfortunately, local governments have outlooks and spending plans that assume otherwise.

voiceofsandiego.org