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Myers' Musings

Posted: December 13, 2008 8:40 p.m.
Updated: December 14, 2008 4:55 a.m.
 

In his epic historical novel "War and Peace," Leo Tolstoy likened Napoleon and other "leaders" of great historical movements to a jungle monkey that accidentally falls out of his tree perch onto the back of a rampaging elephant, and then through the ultimate act of hubris convinces himself that he controls the movement of the elephant crushing everything in its path even though he hangs on for dear life.

I predict that hubris may enter the common vernacular during this era of the humbling of once-confident and arrogant institutions more than any other word; from the neocon assertions of a "cakewalk" in Iraq to the hedge fund "geniuses" who made money utilizing 30-to-1 leverage in an era of historically low interest rates.

Even the crazed quasi-president of Iran asserted a short time ago that oil prices would "never" fall below $100 per barrel. It worked until it didn't!

And so while we watch the humbling of one international and national institution after another, we pause to think about who in the SCV may encounter the bitter taste of his or her own hubris in the coming months.
First to come to mind: The development community. This group certainly made hay while the sun shone on record liquidity and easy credit.

Reading Panglossian reports and projections from their various associations, and egged on with customers also tapping the spigot of easy credit, the now-humbled development community faces bankruptcies and other hardships since, bless their hearts, they felt the courage of their convictions and reinvested their prior profits in additional leverage and bubble-priced real estate now deflating quickly with the fast de-leveraging of the economy.

Second to come to mind: Local governments, but primarily the city of Santa Clarita and Los Angeles County. Fueled by development fees funded by developer debts then translated into seemingly never-ending increases in sales tax revenue from the retail built by those self-same developers and a robust auto row also fueled by easy credit, the city of Santa Clarita built capital improvement after capital improvement from aquatic centers to skateboard parks literally out of current receipts.

Did the city management wisely maintain a modest employee base throughout this now temporary boom in revenues, or did they radically increase their footprint thinking the good times would rule indefinitely?
With respect to the county areas, flush property and transactional tax coffers made it rather easy to throw various small bones and additional services for which the Town Councils could agitate and then claim credit. Guess what gets cut first when the coffers get empty?

Third to come to mind: The William S. Hart Union School District. The last 10 years saw exploding enrollment with its attendant per capita state payments growing and providing an ever-increasing operating budget that left little need for wisdom and efficiency in operating items.

Low-interest bonds fueled by cheap money and now-discredited credit default instruments allowed the district to increase its physical plant by 50 percent with two new high schools and junior high schools, now cannabilizing attendance at the legacy high school of Hart and junior high schools of Arroyo Seco and Placerita Junior High.

The languishing of the Fair Oaks tract will leave Golden Valley a rump high school perpetually weak in athletics and academics.

Add to this a demographic malaise caused by slower residential construction and families moving less, and even a slight decline in enrollment followed by the per capita payments could cause much pain within the school budget and difficulty in funding the maintenance and operating costs of the increased physical plant. Ironically, the inability to build a Castaic high school may prove a true budget-saver.

But who can feel hubris during this time of humility? Ironically, the no-growth crowd, just like the monkey on the back of the bull elephant, will feel its oats.

The hospital expansion will not move forward due to the lack of available credit and concern over the place of the hospital in the new health care regimen that must come to move the economy forward in the long-term.

Residential and commercial developments already stopped in their tracks due to the lack of money and demand will continue to languish for the foreseeable future.

But like the hubris of all those above, their hubris will come to an end, too.

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

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