Los Angeles Infrastructure Financing Problem Due To Prop 13

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Los Angeles, or more pointedly, the City of Los Angeles, is deferring much needed repairs and upgrades to its roads and sewers, or what is commonly referred to as its “infrastructure.” Today’s New York Times article (perhaps done at the behest of New York Mayor Bill DeBlasio to get back at LA Mayor Eric Garsetti for making fun of his city on the David Letterman Show) points to events such as the recent rupture of a 90-year-old water main, causing flooding of much of the campus of the University of California, Los Angeles.

Adam Nagourney writes: “With each day, it seems, another accident illustrates the cost of deferred maintenance on public works, while offering a frustrating reminder to this cash-strained municipality of the daunting task it faces in dealing with the estimated $8.1 billion it would take to do the necessary repairs. The city’s total annual budget is about $26 billion.”

Well, the NY Times writer is right, but what was wrong with his article is he never mentioned the real problem: Proposition 13. It’s amazing that time can pass to the point where the key item of legislation that has caused this problem is, suddenly, forgotten. The event of another generation.

But this is a case where one generation has truly passed on its costs to future ones, like todays. What Prop 13 did was reduce property tax rates without regard for any needs by municipalities. It just sought to reduce property taxes to one percent. That was it.

The passage of the Howard Jarvis and Paul Gann initiative didn’t result in California feeling the impact of that immediately; it took nine years before cities and counties started to have to reduce services. But a funny thing happened: California itself never stopped growing. People kept migrating in, and others were being born. And new buildings were built, and new businesses were started.

In short California’s population grew, and with that, the cost to provide services grew, and add inflation to that, and you’ve got the makings of the financing problem we have today.

Increasing the number of parking tickets written, to mention one of the more draconian responses to the problem, doesn’t help solve it. The one solution is the method many in California don’t seem to want to consider.

The only way out of it is to raise property taxes state-wide.

Stay tuned.

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