Michel Nolan, Staff Writer
Posted: 07/12/2012 05:19:36 PM PDT
Despite allegations of mismanagement, it’s the economy that is to blame for San Bernardino’s path to the brink of bankruptcy, said an economist who studies the region and has consulted with governments in the Inland Empire.
“San Bernardino was vulnerable anyway and the economy pushed it over the edge,” said John Husing said, chief analyst at Economics & Politics Inc., an economic consulting firm that has forecast economic activity in the Inland Empire.
Husing cited three issues that contributed to the city’s financial demise.
In 2005, which was the city’s retail sales peak, the city had $3.28 billion in retail sales, in part to San Bernardino’s location as one of the major hubs at the crossing of the 215 and 10 Freeways.
By 2011, retail sales fell to $2.30 billion a nearly 30 percent decline in retail activity in the city.
“The importance of that for a city is the retail sales tax on those sales is their (San Bernardino’s) major source of discretionary funds to be used for paying for fire and police and anything else they can afford.
“Declining 30 percent is a major, major hit, so that’s part of the reason the economy helped put them in trouble,” Husing said.
The next issue was declining assessed property valuation – the collective appraised property value throughout the city.In 2008 it was $12.2 billion. In 2011, it was $10.3 billion, a drop of $1.9 billion in three years – a 15.4 percent decline.
That meant not only did the city lose 30 percent of its retail sales tax from the peak, it lost 15.4 percent of its property tax revenues, Husing said.
In contrast, San Bernardino County had its sales activity drop only 13.1 percent. But the city dropped 30 percent, Husing said.
A third hit dented the city’s financial position. It was the faultering housing market.
Husing said there are 25,300 homes in the city with mortgages. Of those, 17,600 are underwater – 69.3 percent of all the mortgages in the city are underwater.
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Of course the economy played a role. Local governments were seeing record amounts of proprty tax revenue courtesy of the housing bubble. Instead of doing the smart thing and saving it for a rainy day, they did what government entities almost always do and increased the size of their budgets. Once that housing bubble revenue dried up, these government entities were all left in a financial world of hurt.