Another scheme for storm water taxes gathers steam in Sacramento

Another scheme for storm water taxes gathers steam in Sacramento: Susan Shelley

By Susan Shelley, LA Daily News

Posted: 08/22/17, 9:14 PM PDT - Click to read this column on the Daily News website

Money is no object when you’re spending somebody else’s.

If those words haven’t yet replaced “Eureka” as the official state motto of California, they soon will. The Legislature is back in session.

The chairs were barely warm when lawmakers advanced yet another sneak attack on property owners. This time it’s a gut-and-amend bill to allow the Los Angeles County Flood Control District to levy special taxes for stormwater management projects.

Created in 1915, the L.A. County Flood Control District provides flood control and water quality services to 85 cities and the unincorporated county area. Assembly Bill 1180 would give the district a new method to raise revenue, or, as the analysis prepared for the Senate Governance and Finance Committee put it, “yet another way for the District to exact monies from taxpayers.”

If AB 1180 becomes law, it’s likely that the flood control district would put a new parcel tax on the 2018 ballot for voter approval.

The bill is currently in the state Senate. It has already passed in the Assembly, except that when the bill was in the Assembly it was about tires, not taxes. When AB 1180 arrived in the Senate, it was gutted like a fish and stuffed with an entirely new bill to allow the L.A. County Flood Control District to levy special taxes. If the bill is passed by the Senate, it will return to the Assembly for a vote to approve the “amended” version.

How much could property owners pay if a parcel tax for stormwater projects is approved?

The San Gabriel Valley Council of Governments estimated that the cost per parcel to comply with the most recent stormwater regulations could be as much as $1,400 per parcel per year. The total cost for L.A. County’s compliance is estimated at $20 billion. Local governments that don’t comply face fines of up to $250,000 per day.

You might expect that any requirement that triggered such enormous costs would have been debated and passed by elected officials, but you’d be wrong about that. The regulations were created by the Los Angeles Regional Water Control Board, in cooperation with the State Water Resources Control Board and the federal Environmental Protection Agency, as part of the implementation of the 1972 Clean Water Act.

The Clean Water Act allows the federal government to regulate “the waters of the United States,” which had traditionally been defined as navigable waters. Over the decades, regulators expanded the definition to include “waters” in storm drains, ditches and even temporary ponds that only appeared during rainy seasons.

President Donald Trump has directed the EPA to go back to the traditional definition of “waters of the U.S.,” but California is ignoring him. The Los Angeles Regional Water Control Board is hanging on to the ghostly mandate that storm drain and flood-control systems must clean the water to drinking water standards in order to comply with the Clean Water Act.

And somebody has to come up with $20 billion to do it.

Stormwater regulations are enforced through a permitting system. L.A. County’s MS4 (municipal separate storm sewer system) permit has uniquely tough requirements, adopted in late 2012.

If you were buying a new dishwasher, and there was one for $400 that would get the dishes clean, and another one for $20 billion that would get the dishes a little cleaner, which one would you buy?

Suppose there was a fine of $250,000 per day for not buying the one that costs $20 billion.

You probably still wouldn’t buy the $20 billion dishwasher, because you probably don’t have $20 billion.

Neither does the L.A. County Flood Control District, or the county, or the 84 cities that have to comply with this permit. That’s why they’re all looking for a way to get you to pay hundreds or thousands of dollars per year in new taxes.

Sen. Bob Hertzberg’s SB 231 would make it possible for local governments to raise taxes for stormwater projects without voter approval, simply by redefining “sewer” to include stormwater. Unless a majority of property owners filed a protest in time, the huge new charge would just show up on property tax bills.

Wouldn’t it make more sense to demand a full review of the MS4 permit to see if it meets any reasonable standard of cost-effectiveness and feasibility?

This would be a good time to call the L.A. County Board of Supervisors (213-974-1411) and your representatives in the state Senate and Assembly (http://findyourrep.legislature.ca.gov) and ask them that question.

Existing Homes Sales Show Tight Market:

The National Association of Realtors released their recent Existing Home Sales report for July and it showed a very tight housing market.  Existing Home Sales are the single best measure of the health of the housing market as they are completed transactions of single family homes, townhomes, condominiums and co-ops.

Here are some highlights:
 - On average, homes listed for sale went under contract in under 30 days for the fourth straight month. Fifty-one percent of homes sold in July were on the market for less than a month.
 - The median existing-home price for all housing types in July was $258,300, up 6.2 percent from July 2016 ($243,200). July’s price increase marks the 65^th straight month of year-over-year gains.
 - Inventory is still a major issue (not enough of it) with only 1.92 million existing homes available for sale, and is now 9.0 percent lower than a year ago (2.11 million) and has fallen year-over-year for 26 consecutive months. Unsold inventory is at a 4.2-month supply at the current sales pace, which is down from 4.8 months a year ago.
 - First-time buyers were 33 percent of sales in July, which is up from 32 percent both in June and a year ago.
 - All-cash sales were 19 percent of transactions in July, up from 18 percent in June but down from 21 percent a year ago
 - Existing Home Sales came in at a seasonally adjusted annual rate of 5.44 million in July from a downwardly revised 5.51 million in June. July’s sales pace is still 2.1 percent above a year ago, but is the lowest of 2017.
You can read the official NAR release here

Overall, the above data is very solid showing steady appreciation and demand, it appears that only the lack of available inventory is keeping Existing Home Sales from grown at an even faster pace. 

New Housing Inventory Update

The housing market pundits who love looking at what we don't have, had a field day with last week's data. What we didn't have was growth in starts and permits in July. Housing Starts dipped 4.8% last month, to a 1.155 million annual rate, while Building Permits slipped 4.1%, to a 1.223 million yearly rate. Before we get caught up in talk about the end of the housing recovery, let's note that most all the drop was in multi-unit starts, which, because of the size of those projects, are very volatile, month to month. Single-family starts were off just 0.5% in July but their trend continues to rise, up 10.9% year-over-year.

Yes, multi-family starts are off 33.7% from a year ago, but that just reflects a shift in the mix. In 2015, 35.7% of starts were multi-family. Last month, multi-family made up just 25.9% of all starts. This is good for the economy, since each single-family home contributes about twice what a multi-family unit does to GDP. Finally, the EVP of an online real estate company explained why today's home prices are not near bubble-era: "while prices nominally have surpassed the 2006 peak, we're not talking about 2006 dollars. We've had 9 years of inflation... home prices today have basically recovered to about where they were in 2004." How about that.

New Construction Expected to Increase:

The biggest issue with our housing market over the past two years is a huge shortage of available inventory with supply sitting well below 7 months at current sales paces.  So, it is welcome news that construction rates of new home builds are projected to hit 1.4 million units on a yearly basis. 

The LegalShield Housing Activity Index rose 3.9 points to 115.3 in July, driven by improvements in both the foreclosure and real estate components of the Law Index. The Housing Activity Index is up 1.8% for 2017 and is currently at its highest point since May 2006. Housing starts improved in June (as the Index has been signaling for several months) but remain below forecast levels, and year-over-year growth is essentially flat. The housing market continues to face significant headwinds, including higher prices for inputs (particularly lumber) and regional shortages of both skilled construction labor and land. However, the combination of existing home inventories near historic lows and nationwide housing prices now exceeding pre-recession levels should lead to increased housing activity. If the housing supply finally picks up to match current demand, construction investment should rise and housing starts may climb to an annual rate of 1.4 million or more by the end of the year.

"The LegalShield Housing Activity Index has a strong record of closely tracking U.S. housing starts over the last 15 years – and the Index continues to suggest that housing starts should be stronger than they currently are," said James Rosseau, LegalShield's chief commercial officer. "The Index is consistent with the fact that U.S. consumers are employed – as underscored by a strong June employment report – with solid credit, manageable debt levels, and heightened confidence about the economy. These factors, combined with historically low home inventories, point to a revival in housing activity."

The LegalShield data was released in public news release, you can read the official press release here.

Real Estate Inventory Market Update

In markets across the U.S., you hear that high home prices and low inventory are slowing things down. So it was nice to see the report that almost 300 markets throughout the country registered an increase in economic and housing activity from the first quarter to the second. The CEO of the National Association of Home Builders, which co-authored the study, said, "This report shows that the housing and economic recovery is widespread across the nation and that housing has made significant gains since the Great Recession." Yet we're not at full strength with "the lagging single-family permit indicator."

One answer to the supply shortage was seen in a realtor.com study, which found that 35% of Millennial homeowners are planning to sell their homes in the next year. Another 6% are unsure, but may do so. These are the starter homes that are at the most sought-after price point in today's market. The realtor.com chief economist said, "Our survey data reveals that we may see more of these homes hitting the market in the next year."  Increased demand is clearly helping new home sales. The Mortgage Bankers Association reports, "through July, applications for new homes remain up by more than 7% compared to the same period last year.".

News from National Association of Realtors (NAR)

The National Association of Realtors (NAR) Pending Home Sales Index is a measure of contracts signed on existing homes. It's a forward-looking indicator of where sales may be a few months out when those contracts go to closing. Monday we got the good news that Pending Home Sales in June were 1.5% ahead of May's upwardly revised reading. This reverses a three month decline, and the NAR now predicts existing home sales will end the year at about 5.56 million, up 2.6% from 2016's 5.45 million. The median existing home price is forecast to end the year up 5%, just below 2016's 5.1% gain.

The NAR's chief economist commented: "Market conditions in many areas continue to be fast paced, with few properties to choose from, which is forcing buyers to act almost immediately on an available home that fits their criteria." Freddie Mac's chief economist concurred, "the spoiler is the lean inventory... nationally, just over five months of supply." Yet he remains positive: "A decade after the Great Recession, the housing market is rebounding. House prices today are higher than they were at the peak in the summer of 2006, near record low mortgage rates have boosted housing demand, and sales volume is robust."

No AC? No Problem: 5 Cooling Tips for Summertime

If air conditioning your home seems like a far-off dream, you’re not alone. Each summer, thousands of Americans battle the heat in their homes, especially at night. Below are a few helpful tips to help you stay cool all summer.

Point that fan out. It might feel good to have air blow over you as you sleep, but to cool your room quicker without AC, grab a boxy window fan and point it out, not in. This will pull warm air from the room and push it outside.

Reverse ceiling fans. In the summer, program your ceiling fans to run counter-clockwise. This will pull hot air up and out, instead of blowing the warm air on you.

Choose the right bedding. When it comes to staying cool during those hot summer nights, cotton is the way to go. Choose a light sheet made of 100 percent cotton, and avoid polyester and synthetics at all costs. 

Frosty bottle. You’ve heard of a hot water bottle, right? Well these helpful toe warmers can also keep you cool during the summer. Stick the bottle in the freezer, and slide it between your sheets before bed.

Make use of your bathroom fan. Have a bathroom right off the bedroom? Turn on the overhead fan and leave the door open to let the fan pull the rising hot air out of your room as you sleep.