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Marin 2016 - Part VII: What will you do when Marin is no longer Marin?

With the June elections in Marin behind us and with community-advocate candidates, who challenged incumbents, having been defeated citizen organizations and watchdog groups are essentially the last men standing against local government dysfunction.

It is now clear that the majority of our elected representatives, the staffs that serve them and state and federal agencies believe that “growth” is worth any price. They seem to agree with the old maxim that “The business of America is business” and everything else runs a distant second.

That approach has been unquestioned for a long time and for decades, most people benefited. But, is it really working, anymore?

Top down juggernaut

The belief that centralized, top down control and housing quotas will solve our housing affordability challenges is starting to look pretty threadbare. Meanwhile, most of the affordable housing “solutions” we are being offered will do nothing but increase the cost of living in Marin and hurt those most in need.

Big government, in this case defined as Sacramento lawmakers, major financial institutions, big labor, major corporations, and the throngs of special interest groups that depend on government and its programs for their life’s blood, now appear to have a firm grip on our future. It is highly unlikely they will rest until they’ve ripped every last semblance of local control away from Marin’s small cities. Legislation to this effect is being passed almost monthly, including provisions that increase the availability of density bonuses, provide “by right” multifamily development provisions in commercially zoned areas, waive local codes and reduce parking requirements for high density development, and greatly weaken the California Environmental Quality Act (“CEQA”).

At the same time, unsustainable growth and development, driven by funding from state and federal agencies, is creating impossible traffic and overcrowded schools, against a backdrop of crumbling infrastructure (roads, bridges), over-burdened utilities (water, sewer, power grid), degradation of the environment and our open space, and the loss of Marin’s small town character. Add to that the current obsession to “get everyone out of their cars,” by doing everything possible to “punish” driving[1] (while simultaneously failing to provide any meaningful public transportation options), and you have a perfect recipe for our local traffic mess.

Fiscal mismanagement, overly generous public employee compensation, and out of control, unfunded retirement obligations are eroding public services to the point where things we used to consider minimal, barely exist, today. Parks and landscape maintenance, road repair, and reliable public transit can no longer be taken for granted. Most Marin cities aren’t even open five days a week, anymore.

In some cities, such as San Rafael, the planning department counter is closed almost as many hours as it is open. And then there’s lunchtime, when many cities just shut down, entirely. Isn’t lunch hour one of the only times when most working people are able to get away and come to city hall to get their problems solved?

What ever happened to the concept of “public service?”

How is it that the private sector can provide services all day, during business hours and even on weekends, but our cities can’t? How is it that in a county where we pay some of the highest combined taxes in the country, our cities are so short of funds that they have to keep asking us to approve more taxes and bonds just to keep the doors open?

An endless fountain of money

Our County and city governments continue to assure residents that there is no reason for concern, even though there is ample evidence in the news every day that unrealistic projections about future rates of return on investments are coming home to roost. But, another reason for their unfailing confidence may be that the way they see it everyone in Marin is so wealthy, they can keep raising taxes and fees, and floating bonds, forever, and no one will complain… or perhaps wouldn’t dare to.

The sales pitch is that if residents don’t pony up whatever funds are demanded, they will only be shooting themselves in the foot. If we don’t approve a Mosquito Tax, Emergency Radio fee, a sales tax for the SMART train, or yet another school bond, our property values will plummet and we’ll all suffer. This endless extortion is used to dismiss all critics of new funding measures, and creates a clever diversion from questions about how the money is being spent or why it’s really needed.

The concept of living within their means doesn’t seem to ever enter the minds of bureaucrats.

For example, Mill Valley is currently proposing an extension of an existing school tax called Measure E. Mill Valley, arguably, has some of the best schools in the country. Yet from the vociferous “Protect Educational Quality” campaign being waged by Measure E supporters, you would think we were living in a neglected, inner city neighborhood.

Measure E levies a significant ($980) property tax on all properties, and includes a 5%, annual, escalation rate so the tax almost doubles in ten years[2]. This, we are told, is to ensure that kids have books and pencils, and programs and special classes continue to be offered. But what no one is telling the public is that the real reason the schools need the money is that most, if not all of the funds raised, will end up going to pay off unfunded pension liabilities in the California Teachers Retirement System, which are growing at speeds that dwarf the tax escalation rate, many times over.

I suppose one could argue that it will still help keep schools running, but if it were “sold” as a tax to pay for unfunded retirement benefits, I doubt the public support would be so enthusiastic.

Honesty and transparency are apparently no longer required of public agencies.

Mill Valley’s Measure E is just one example of the general direction public spending is headed. Fanciful accounting assumptions and endless “a la carte” government taxation threaten California’s and Marin’s future in more ways than might be obvious, on the surface.

Can raising the cost of public services create a diverse community?

What could be more fundamental to equal opportunity for all than public education? And part of that is getting kids to school.

In Mill Valley, elected officials have been falling over each other, lately, congratulating themselves because they’ve brought back yellow school buses, for public schools. The only problem is kids only get to ride on the bus if their parents can afford to pay the fee of $588 per child, per year for the service. Have two kids in school? That’ll be $1,176 per year. And space is limited with passes sold on a first come, first serve basis.

True, families that qualify for reduced lunch program fees can get 50% off the pass price, but that’s still no bargain. There’s also no special dispensation for handicapped or otherwise physically challenged students. However, the more important question is how is this socially just? It would have been heresy to even suggest this type of program 30 years ago. “Public” school and school buses were about everyone having the same opportunity, regardless of their economic situation. That’s why we called it “public” school.

But not anymore.

How do Marin elected officials square this up with their professed, social equity values?

But, people are practical creatures. If it’s easier and cheaper to buy gas and drive, they will. Want proof? This year only 135 kids (6% of approximately 2,200 students in K through 8th, in Mill Valley schools) signed up to ride the bus. And those who did sign their kids up still have to drive them to designated bus stops, which are far and few between. So, most parents apparently decided they might as well drive another few minutes to school.

Perhaps, instead of falling back on shop worn tax and spend ideas, our policy makers should reach out to Uber,[3] or Google’s Wave ride sharing service, or Ford’s Chariot shuttle services, and invite them to partner in providing a school shuttle service. We could even position this as a pilot project that might be funded by government and private foundation grants. Or, how about using crowdsourcing? How about issuing a public Request for Proposals (“RFP”) to solicit solutions and investment?

This is, after all, 2016 not 1956.

But then, that would take thinking outside of our elected officials’ comfort zones, and it would require work by staff, a departure from the boilerplate proposals they crank out, which seem to be vetted by only one criteria – “Other cities are doing it, so it must be okay.”

Can raising the cost of living in Marin create affordable housing?

While elected officials continue to propose increases in taxes and fees and special assessments to compensate for living beyond their means, they also continue to pay lip service to “affordability.” It’s become politically fashionable to decry the high cost of housing in Marin, but what about the disconnect between affordable housing and all these regressive fees and taxes?

What no one seems to want to tell the public is that increased property taxes and fees are passed directly on to home buyers and renters. Ironically, this means that school taxes like Measure E just make it more difficult for a teacher to be able to afford to live in Mill Valley.

However, when government does try to address the need for affordable housing, instead of trying to find ways to engage the development community and private capital markets, or to incentivize and subsidize existing property owners to build affordable units, all they seem to be able to think to do is add to the costs of housing by creating harsher in lieu provisions, and assessing outrageous affordable housing impact fees.

In Mill Valley, for example, the current fad is a plan to establish an Affordable Housing Trust (bank account) and assess “affordable housing” fees on all new construction and almost all renovations (over 250 square feet). This new fee would amount to almost $100,000 on a typical 3,000 square foot home.

The City confidently predicts this will raise about $750,000 per year.

Interestingly, in their proposal, they provide no explanation about who will run the trust, what it will cost to manage it, how the funds will be used, invested, or distributed, what criteria or methods will be used to select projects that benefit, or anything else. The City has no real estate investment or development expertise or experience, no staff to handle it, and no idea what the net amount collected will be after operating costs are considered. Yet each level of review just moves this proposal up the ladder toward approval, to the sound of politically correct applause.

This “feel good” way of managing government is analogous to going into a bank and asking for a loan to start “a new business,” without any information about what that business will do or how it will pay the bank back. You’d be laughed out the door.

But, even if we set all that aside for a moment, do the promoters of this idea have any idea how real estate markets work?

If you demand that a builder pay $100,000 fee to build a new house or renovate an existing one, that builder will do everything they can to pass that cost on as an increase in the selling price. And since a new 3,000 square foot house in Mill Valley, will probably fetch close to $3,000,000, the incremental increase in selling price is just 3 percent, so the builder can probably recoup the fee upon sale by raising the price to $3,100,000.

But, the more important question is what does that do to the overall cost of housing in the Mill Valley real estate market?

Housing appraisers use one basic tool to arrive at estimates of value: “comps” (sales of homes of comparable value). If there’s a sale of a new or newish 3,000 square foot home for $3,100,000, then guess what happens? Yes, all new 3,000 square foot homes in Mill Valley will increase in asking price buy $100,000, as will the cost per square foot comparable price, also used in appraisals.

The unintended consequence is that the offsetting overall increase in housing costs across the board in Mill Valley, will dwarf the already questionable benefits of the puny $750,000 per year in fees raised, making the whole enterprise extremely counterproductive.

At the same time, as a result of these fees, existing residents will either cheat the system (build without permits) or cancel projects to avoid the costs. Multifamily developers, on the other hand, will off load the burden of extra fees on the renters of their market rate units, causing average rental rates in Mill Valley to rise.

“The beatings will continue until morale improves”

Layer upon layer of sales taxes, permit and processing fees, special purpose fees and taxes, affordable housing impact fees, housing “Trust” management fees, municipal and agency services fees, government bond debt, school debt, and other regressive forms of “revenue enhancement” only increase the costs of living and doing businesses in Marin. This creates a disproportionate burden on the poor, the young, the elderly, service workers, teachers, the disadvantaged, and, yes, the dwindling middle class.

This produces community dynamics that push out everyone but the wealthiest residents: the exact opposite of what our elected officials claim to be their policy goals. All our elected officials are accomplishing is moving us ever more rapidly toward being a county populated only by the very rich… and their servants.

However, in Marin, if you even question the wisdom of governments extracting money from residents for programs with ideologically popular catchphrases like “affordable housing,” you are instantly branded a NIMBY or worse, no matter how inane the idea is.

What our political leadership has failed to understand is that it is economically impossible to create affordable housing at any meaningful scale, on the backs of the residents who live here. Our cities and our county are just too small to provide the financial wherewithal needed to create it. The only way to make affordable housing really “pencil” is to bring in investment and subsidy from outside the County, or at a minimum, by not trying to punish people into building it.

Why aren’t our local governments making more effort to use the bully pulpit to seek out regional, state, and federal funding to subsidize affordability, or creating pilot projects that might be underwritten by private banking using community development finance institution funds? These are things that government is in a unique position to do.

Perhaps, if more outside funding and private capital were engaged, we could begin to explore programs such as development loan co-insurance, equity sharing investments, and reduced fees and other incentives for local, property owners who want do the right thing.

We won’t know if we don’t try.

In the meantime, although affordability may be on everyone’s mind, there are more onerous problems looming that are getting far too little attention.

Government funding gaps are driving the need for more and more growth in an attempt to “out run” the consequences… which, ironically, will only lead to even greater consequences down the road.

Read Part I – Is representative government slipping away?

Read Part II – Will the suburbs be hunted to extinction?

Read Part III – Dispatches from the front – Mill Valley

Read Part IV – Dispatches from the front – Hamilton Field

Read Part V - Dispatches from the front - Corte Madera

Read Part VI - Dispatches from the Front - Marin County Government

Read Part VIII - Hide the ball

Read Part IX - Regionalism

Read Part X - Endgame

[1] By failing to maintain roads and highways, address traffic congestion hot spots, or increase road capacity.

[2] This is at a time when the Consumer Price Index is at only 0.8 percent.

[3] Uber recently launched an app driven, public shuttle service in Pittsburgh, using self-driving SUV’s.