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Tim Myers: Cheers and jeers for the city's plan

Posted: May 2, 2009 4:28 p.m.
Updated: May 3, 2009 4:55 a.m.
 
My apologies to the "B" and "C" list local Republicans now staffing a tea party near you, but your "A" list brethren who made it a point to stay as far away as possible from the anti-Obama April 15 party plan to ask for and lay their hands on, as much of the filthy and evil stimulus money as they can.

Sorry, but you need to get over your lack of macro-economic knowledge and now live with the fact that government will replace private demand in a time of economic downturn.

The plans culminate in an "Economic Development 21-Point Business Plan for Progress" drafted by city staff and reviewed at the April 28, 2009, City Council meeting.

A few cheers and jeers for that plan.

I first must compliment the city manager and staff for putting together any type of plan.

Most municipalities weathering the storm of an economic downturn - particularly municipalities that relied so heavily on bubble-related revenue from real-estate development and faux housing wealth that probably fueled sales-tax-rich auto purchases that likely would not otherwise have been made - would merely hide under the bed until it was over, hoping the state would not loot too much revenue and confident for a federal bailout.

Now in typical "One Minute Manager" format I must relate a jeer. The biggest economic problem facing the city relates to increased unemployment.

While the city unemployment rate stands several percentage points below the county and state averages, this equates to a comparison of the Hart district standardized test results to those of L.A. Unified: They ain't apples to apples!

Instead, one should focus on the relative deterioration that, depending on benchmarks, equates to a tripling of the number of unemployed residents with all the attendant social problems that would result without a significant turnaround.

Now the plan assumes, with a great deal of hubris, that the city of Santa Clarita constitutes some type of autarky. (For those "tea party" participants attempting to stay as far as possible from a copy of "The Economist," an autarky constitutes a self-contained economy.)

Any mildly coherent person realizes resolution of the employment problem only occurs with a turn in the macro-economy, and not with the allocation of some $100K to micro-grants to new businesses through the Center for Business Development (point 5 in the 21-point plan).

Even quainter? Point 20 of the plan, which allocates $1.1 million for "Neighborhood Stabilzation" - money to purchase, rehab and demolish foreclosed homes.

According to Realty Trac, 1,702 area homes stand in some process of foreclosure, so charitably this small amount of money could address 0.3 percent of the problem.

But give credit where credit is due. I found two of the 21 points absolutely brilliant! First, point 19: Use Tax Incentive for Business Expansion.

Every state that imposes a sales tax also imposes a use tax. In the case of a sales tax, the vendor collects the sales tax and remits it to the state.

In some cases, however, the state may not require the vendor to collect and remit the sales tax due to a lack of California activity or location.

In this case, the state requires the purchaser to self-assess and remit a "use" tax to the state, with an appropriate amount directed to any impacted municipality.

Point 19 works this way: If a business purchases taxable items worth at least $2 million and directs the appropriate $20K use tax to the city of Santa Clarita, the city will allocate one-half of the payment to cover city permit costs or take the form of an outright rebate.

Why does this constitute genius? A $2 million purchase subject to use tax would imply a total use tax due of $185K. The business may think it can finesse this liability since the vendor did not collect sales tax, but the state Board of Equalization will eventually get around to collecting this tax after examination with appropriate penalties and interest, but probably two to three years down the road.

The city (and state for that matter) need the money now, so what better way to cause honest behavior and accelerate collection of the tax by offering a $10,000 rebate?

And then point 9, on which I believe one could find the fingerprints of Gail Ortiz.

During a downturn, businesses rush to cut non-personnel and investment expenses first, including event sponsorships.

After an uptick, inertia makes it difficult to bring the sponsors back.

Point 9 suggests entering into five-year sponsorship agreements with the first year free and payment made in the last four years.
What a great idea to allow businesses to cut costs and keep them involved!

So a mixed bag of cheers and jeers, but I applaud the professionals at City Hall for attempting to do something rather than just watch revenue shrivel.

Tim Myers is a Valencia resident. His column reflects his own views and not necessarily those of The Signal.

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