Ventura's bad economic policy

Economic Illiteracy, Indifference And Denial Plague Ventura Finances

—Herb Stein, Economics Professor


[The Consequences of Ignoring Economic Reality]

Most people are now well aware of the economic news. The City of Detroit filed bankruptcy under a cloud of $18 billion in debt. Crippling problems with corruption, unfunded benefits and pension liabilities, nepotism, and cozy political relationships between public unions and elected officials served to bring about their demise.

Detroit's bad economic policy

Detroit’s bad economic policy led to bankruptcy

These problems were enormous, but it was allowed to happen because of an attitude of denial.  Elected officials and citizens continued year after year to look the other way despite mounting evidence that their City was rushing towards bankruptcy – the debt continued to mount and the income continued to dwindle.    The official cause of death – no money.

How would you feel if you learned that someone you know was spending more than he was earning and having to dip into savings to keep going?  You might think at first blush that it’s because of the Great Recession.  But, what if you then learned that in the 4 years since the Great Recession the same person had not changed his spending habits as well as not earning enough income to support their profligate spending?  To explain this as being due to anything other than bad judgment, or reckless fiscal mismanagement, is to engage in the same type of denial that led the citizens of Detroit into bankruptcy.

California Cities In Bankruptcy. Will Ventura Follow?

San Bernardino went bankrupt because of bad economic practices

This news follows the similar fate of cities closer to home like Stockton, Vallejo and San Bernardino.  The City Council in San Bernardino decided to file a Chapter 9 municipal bankruptcy.  That city was running a $5 million deficit on a $130 million budget and did not have enough cash to pay its vendors, workers and retirees.  In the last 4 years the tide has gone out and were are now finding out who was swimming naked.

So, good reader you ask – “What do the financial problems in Detroit or these other California Cities have to do with Ventura?”  The answer lies in the fact that over the last 4 years City Government has used “budget gimmickry” to make it appear as if the City Council had balanced our budget each year.  Solvency was the stuff of fiction for our then City Manager, Rick Cole and Mayor Bill Fulton.  They are gone and we are left with economic reality – not enough money to pay our obligations, an economy that is not recovering and unfunded public pension obligations that have doubled.


[Bad Economic Policy In Practice]

On June 17, 2013, our new City Manager presented a Budget for 2013-14 to the City Council for approval.    The budget is not balanced.  In the last 4 years revenue decreased from $94.1 million to $82.4.  The Council was presented with the following historical and projected income and expense comparisons (numbers in millions of dollars):

Fiscal Year Income






2008-09 $94.1 $94.1 0
2009-10 $85.1  $96.5 $11.4
2010-11 $88.1 $80.4 $7.7
2011-12 $ 81.0 $81.5 $0.5
2012-13 $82.4 $84.4 $2.0
2013-14 $86.7







Our new City Manager outlined, in a kindly manner, the efforts that had been made in the past to try to “balance the budget”, which had not been successful:

“In the past 5 years the City of Ventura has experience a decrease in general fund revenues of $16 million dollars.  During the same period, budget and service cutbacks have eliminated more than 100 positions, increased employee contributions of both medical costs and retirement costs, reduced landscape  maintenance and park service levels, reduced street repairs and resurfacing, discontinued the Crime Prevention Program, and reduced the Police Department Gang Unit, eliminated the Neighborhood Traffic Calming Program, temporarily closed Fire Station 4,  reduced sidewalk repair program, reduced hours at the Senior Centers…just to name a few.  While these efforts were extensive, they simply have not been enough to balance our budget.  This is evidenced by the continuing decline of our fund balances, which have been decreased by approximately $10 million dollars over the past 5 years.

“Utilizing fund balances, or living off your savings accounts, is not an uncommon practice for municipalities during times of economic challenge but it is only a short term solution that is undertaken with the optimistic view that economic conditions will soon change for the better.”
—Mark D. Watkins, new City Manager

Too Much Data, Not Enough Information Muddles Economic Policy

This 569 page budget provides detailed expenses of $89.5 million dollars, but it totally lacks any information on how this year’s revenue of $82.4 million dollars can be increased to meet our projected expenses of 88.3 million dollars in 2013-14.  Where will that additional $7,100,000 be generated?   If true we are asked to accept that our City will increase our income by 8.6% next year, more than twice the U.S. Gross Domestic Product of 2.5%.  What makes our City officials believe our rate of growth will be more than twice the national average?

On the liability side the facts frightfully demonstrate that we are on a financial cliff.  Not only are we facing a deficit of at least $1.6 million or more in our General Fund Budget, there are the off the books debts.  First, there is the matter of the unfunded pension obligations to City employees, policemen and firemen.  In 2008 those obligations totaled $48 million.  In our August, 2008, edition we argued that the Council should take steps to change the pension structure because those benefits were not sustainable.  Today those obligations total a minimum of $96 million upward of $350 million, depending on the assumed rate of investment from CALPERS.

“If we do not find a way to restore these funds in the next 5 years we will have serious financial difficulty.”

In spite of these looming long term commitments and with an urging that the City Council not increase the Firefighters pension entitlements to 3% at age 55, the Council did it anyway.  Nobody on the City council could identity where the funds would come from to pay for this increase.

Second, there is the $12 million in reserve that we have had since 1992.  Not only was the income from this reserve used by the City Council as a source of income for the General Budget over the last 20 years, but we learned in March, 2013, from our interim City Manager, Johnny Johnson that $7.5 million dollars in the Public Liability Fund, Workers’ Compensation Fund and Information Technology Fund had been moved to other areas in the budget to make it appear as if our budget was balanced.  In his words, “if we do not find a way to restore these funds in the next 5 years we will have serious financial difficulty.”


Inclusionary housing bad economic practice

Inclusionary housing continues Ventura’s bad economic practices

In our last issue we reported that the City Council, on July 15, 2013, would consider a request from the Community Development Director to cancel the Ventura ordinance requiring builders and developers to donate a percentage of their development to low income people. His reasons were clear, there is no housing being built in the City of Ventura.  His view was shared by the State Department of Housing and Community Development, which had concluded that such ordinances “are a constraint to the development of housing”.

The Council room was flooded with the homeless, low income folks and their children, all prepared to tell their story and urge denial of the request to cancel the ordinance.  This was orchestrated by CAUSE. Their organizers were in the hallway handing out bottles of water and signs that read ‘HOMES FOR EVERYONE”.  A group organizer actively moved in an out of the group with clip board in hand.

Councilman Andrews quickly presented a motion to defer a decision on the measure and for the appointment of a Blue Ribbon Committee to study the matter further.  Councilman Brennan, joined by Councilman Morehouse, pointed out that when they came up with this idea for this ordinance in 2006 “we knew we were going to have to massage it because we did not know where it was going.  We expected we would have to come back and look at alternatives”.   The three of them voted to table the matter and appoint a special committee of “experts” to make recommendations.

“This 2006 ordinance was a half baked idea”

Councilwoman Weir painted a more candid view of this ordinance.  In her words “this 2006 ordinance was a half baked idea”, and that “it was no surprise to anyone it is not working”.  She also observed that a lot of those people in the audience who spoke against cancellation were homeless and would never qualify under the program anyway.  Ms. Weir favored an “in-lieu” fee to help the homeless transition.  Mayor Tracy and Councilman Monahan joined her in urging an “in-lieu” fee.  They voted against the motion by Councilman Andrews to postpone and appoint a committee.

Deputy Mayor Heitmann provided the decisive vote to table and appoint a Blue Ribbon Committee.  She seemed somewhat confused by the discussion, did not profess to have any knowledge on the subject thus voted to table the matter because there were “a lot of unanswered questions”.  A perplexing comment given that the Council and been provided with a lengthy and detailed report from the Director of Community Development explaining why this ordinance had failed.

Nobody knows who will be on the Blue Ribbon Committee.

Editors’ Comments

Economic illiteracy is not recommended as a qualification for the Ventura City Council. We urge you to choose your Council Members wisely come next November.


R. Alviani      K. Corse      T. Cook
J. Tingstrom  R. McCord   S. Doll

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Eliminate Inclusionary Housing Oridnance

The Inclusionary Housing Mirage

Winston Churchill

Some People regard private enterprise as a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse, pulling a sturdy wagon. —Winston Churchill



The Ventura City Council, at their meeting on Monday, July 15, 2013, will consider the recommendation of our new City Manager, Mark D. Watkins and Community Development Director, Jeffrey Lambert, “to eliminate (cancel) both the Citywide and Downtown Inclusionary Housing Ordinances (IHP)”.

 This ordinance was adopted in August, 2006. The author was Councilman Brian Brennan. The idea was that there are people in the City who “need housing”, and cannot afford to buy or rent housing unless they received financial assistance. So, on a vote of 5 to 2 it was decided that if a person or company wanted to build 15 or more residential units “for sale” or “for rent” then that developer, at their expense, was required to donate a percentage of the living units to low income people. The units had to of the same quality and disbursed throughout the project.

“The adoption of an inclusionary housing requirement in conjunction with the Housing Approval Program, will provide a mechanism for all residential development containing 15 or more units to provide ‘their fair share’ of affordable housing…” Resolution No. 2006-058         

Now, 7 years later, it is clear that the concept is not working. The “developers” have not stepped forward, they have declined to invest and build the projects in the City and new construction has stalled. Our new City Manager and the Community Development Director are recommending that this ordinance be cancelled. The full report can be read on line as agenda item 14 for the Council meeting of June 17, 2013.

“It is staff’s recommendation… based on the State Department of Housing and Community Developments conclusions that IHPs are a constraint to the development of housing. In addition, staff believes imposing this obligation to provide affordable housing units on market rate developments places an undue burden on these developments and increases the cost of market rate units…”

—Administrative Report, May 29, 2013



Protesting Inclusionary Housing Ordinance

Some will protest eliminating the Inclusionary Housing Ordinance.

Opponents to the proposal to eliminate this ordinance will be very visible and vocal in their opposition at this City Council meeting. They will demand that the council reject the staff recommendation, because everyone is entitled to affordable housing, and that housing “for sale” or “for rent” can be provided to those in need without spending public money. Their logic is that tax payers will not have to pay anything because the developer will have to pay. Alternatively, they ask that if this is not acceptable then the developer should pay an “in lieu of fee” of $200,000 or more.

This argument will find a sympathetic ear in Councilman Brennan. No surprises. He authored the original concept, proselytizes “social equity”, and is strident in this view that affordable housing for all (free or pay what you can afford) is an unassailable truth – if you cannot afford housing then is somebody else will have to pay.



A reader and property owner, who expressed a desire for anonymity, stridently supports the efforts of the City Council to abolish or severely restrict the current inclusionary housing program. In our view “we can think of no other program which so seriously restricts private developer efforts to build housing in Ventura as well as seriously impacting our revenue base of property tax”.

Affordable housing mandates have had an unintended consequence: they have discouraged home building, and the diminished supply of housing has driven prices up.

The opponents of the change ignore the fact that almost 40% of Ventura’s housing stock is already dedicated to some form of subsidy for affordable housing, leaving 60% to pay the bills of the City. Advocates of affordable housing seem to have no concept of economics, and feel that someone else should pay for their housing costs.

In 2008 the Independent Institute published an article on the subject which is instructive. Extracts from that article are quoted below.

“We recently analyzed how inclusionary zoning laws, requiring builders to set aside a given percentage of new construction for low- to moderate-income individuals, have affected both new home prices and the quantity of new homes over time.

We compared the changes in housing prices and supply in these cities to those without a similar ordinance. The cities that adopted inclusionary zoning laws saw a 20 percent jump in housing prices and a 10 percent decrease in the number of new units built. This is the basic law of supply and demand at work. Affordable housing mandates have had an unintended consequence: they have discouraged homebuilding, and the diminished supply of housing has driven prices up.

Despite the nice-sounding name, inclusionary zoning is still a price control that leads to a decrease in the amount of housing. Economic theory and evidence demonstrate that imposing price controls and taxes on housing is one of the worst ways of encouraging the production of housing.

The real problems causing the affordability crisis are regulations that prevent increases in the supply of homes. Eliminating restrictive zoning regulations will give consumers more choice and make housing more affordable. For those who truly care about making housing more affordable, price controls are not the answer.”


Architect against Inclusionary Housing

One architect expresses concerns over the Inclusionary Housing Ordinance

The real challenges I encounter regarding inclusionary housing ordinances are around the issue of for-sale homes and financing. For the developer, inclusionary housing requires them to write down or subsidize the cost of the affordable units. The ordinance assumes that the project has enough profit margin to allow this to happen, but as demonstrated in the last several years, there is no guarantee that this will be the case.

From the low income buyer qualifying for a the low income housing is problematical. The IHP assumes that the low income home buyer can qualify for the loan, of even a subsidized amount. That is an enormous hurdle, but even if they can qualify such projects will have association fees of hundreds dollars per month. These costs cannot be written down as they must be paid by every member-owner of the association.

The intent of the IHP is positive – trying to keep new development from overwhelming existing smaller scale neighborhoods. But the matter of affordability works in direct opposition to this intent. The City has recently been trying to meet these challenges and has been moving to adjust interpretations to make the situation more workable. Not everyone knows or appreciates that effort.

Problems notwithstanding finding ways to provide affordable housing in the Downtown area, for both rental and purchase housing,  is a laudable goal. To provide smaller more affordable market-rate dwellings, such as studio and loft-type apartments, ranging from 400 sq.ft. to 600 sq. ft. will meet a real need. These can be very nicely done and are popular dwelling-types for our younger Venturans, who are drawn to the downtown as a place of social and cultural interest. Many are employees of the variety of businesses – restaurants, retail shops, professional and service businesses.

Editors’ Comments

The State of California Department of Housing and Community Development, our City Manager and Community Development Director advise that this ordinance should be cancelled because it is not working. We should listen. This ordinance has not only failed in its stated objective, but has in effect stalled housing growth.

Your letters and comments on this issue are extremely important. Send emails to Ventura Mayor, Mike Tracy


B. Alviani             K. Corse          T. Cook

J. Tingstrom       R. McCord       S. Doll

[1] Opinion provided by a longtime Ventura architect.

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