Budget Workshop March 6, 2008
This was the first workshop on the 2008-2009 Budget, but it started out with a general economic outlook for the nation, southern California and Chula Vista. It was then mentioned that for 2007-2008 we so far have an 8 million dollar deficit. The 15 million cut in December was not enough. We are still spending more than we are taking in.
First to speak was City Manager David Garcia. (Video of Mr. Garcia's Federal and Southern California presentation.) He started out by talking about the state of the National Economy. The GDP has slowed down considerably. The housing downturn may have started the problem, but now other areas are being impacted.
The housing situation continues to worsen and the effect in the credit market is starting to be felt in the commercial market as well. San Diego is the second worst market. According to the Federal Reserve Board there is still weak but positive growth. Mr. Garcia did mention that it is an election year and no one in Washington will use the R word-Recession.
Next he talked about the economic situation in Southern California. As you can see the notice of defaults went up significantly in May and June of 2007.
Mr. Garcia drew the line with the double arrow over the period we are now in until the end of the year to show when the majority of these sub-prime loans will reset to a high rate that many will not be able to pay. One of my neighbors had a loan that was going to reset to $3,500 per month, which he absolutely could not afford. He had to let the home go back to the bank. This is a great human tragedy, but the bank sold the home for less to the new family, which moved in a few months ago.
The one positive sign is that there is still job growth. This is due to the diversification of the southern California economy. Biotech, Wireless, Technology jobs do not seem to be being affected, and the weak dollar is making American made products more competitive internationally.
The graph below shows that the San Diego, Carlsbad, San Marcos area where many Chula Vista residents work has had steady job growth. It is second only to the Santa Ana area in southern California.
Next Mr. Garcia spoke about the economic conditions in Chula Vista. (Video includes council comments.) The slide above shows the three areas where there are great hopes of economic development-The Bayfront, Third Avenue, and H Street.
This slide is the first on the Chula Vista economy. There is a great hesitancy to use the word recession, but as this slide points our SANDAG did not accurately predict the credit crunch we are now experiencing.
Mr. Garcia emphasized that the Median Home Prices graph shows that anyone who bought
a home since 2004 in Chula Vista now owns a home that is worth less than they paid for it. This is a situation where many people walk away from the home rather than wait out the market. Not at all a good situation for Chula Vista, which has had a lot of home sales since 2004.
If the state does not do something to provide more money to the schools and school personnel are laid off, this will hit Chula Vista very hard since there are a large number of teachers and other school employees living in Chula Vista from all of the school districts in San Diego area.