Federal Coronavirus Funding Boosted San Diego County’s City Finances

John Moorlach

Senior Fellow & Director, Center for Public Accountability

John Moorlach
May 30, 2024

Federal Coronavirus Funding Boosted San Diego County’s City Finances

For the 12 months ending on June 30, 2022, the coronavirus lockdown by California Gov. Gavin Newsom was still in effect. His implementation of this lengthy and heavy-handed measure would be in place for another eight months. But, in March 2022, the Federal Reserve Board made the first of 11 interest rate hikes to slow down the economy amid concerns about rising inflation.

Add to this, the Federal Government’s infusion of an incredible amount of cash into state, county, city, and school district coffers, through the Coronavirus Aid, Relief and Economic Security Act (CARES Act), and 2022 was a significant fiscal anomaly for municipalities in this nation’s history.

The impact on San Diego County’s cities, as seen through their Annual Comprehensive Financial Reports (ACFRs) for the year ending June 30, 2022, can be observed in the graph below.

Caltrans Area 11 is comprised of San Diego and Imperial Counties, so they were combined for the June 30, 2019 rankings (see San Diego in Last Place in Regional Fiscal Rankings, July 7, 2023). But due to the severe four-year delinquency by two Imperial County cities in completing and issuing their ACFRs, Holtville and Westmorland, we are presenting San Diego County solo.

Having cities this late on completing and issuing their annual audits is rare, but not unique. Compton is the only Los Angeles County city that has not completed its ACFR for the year ending June 30, 2021, holding up this County’s rankings. And when you contact the city, you get an email response from their legal counsel. How’s that for open government and transparency?

For San Diego County’s 18 cities, to review its rankings for the fiscal year ending June 30, 2020, see City of San Diego Fell Behind $191 Million in First Year of Pandemic, May 15, 2024. And for the June 30, 2021, rankings see Can City Budgets Be Tightened Up, or Should Taxpayers Pay More?, May 22, 2024.
For the third annual ranking with 2022, there is one San Diego County city that seems to have a bad case of fiscal hyperactivity. Del Mar, the host of the third largest county fair in California, moved up for the second year in a row, this time by two positions, as its unrestricted net position improved by $5 million, thanks to its revenues exceeding expenditures by $4.6 million.

Del Mar’s per capita improved by $1,292 for each of its 3,939 residents, making it the top improved city for the year out of the ten cities that moved up the same or better than the County Seat, the city of San Diego, which improved by $120 per for every man, woman, and child.

The other top nine movers were Coronado ($1,203), Oceanside ($267), National City ($248), Imperial Beach ($243), El Cajon ($231), Poway ($205), Encinitas ($167), Escondido ($145), and Solano Beach ($120).

Only one city failed to move forward. The city of Santee had expenditures in excess of revenues of $2.2 million, an increase in pension liabilities of $5 million, and increased its restricted assets by $4 million, explaining the $8.9 million increase in its unrestricted net deficit.

The population for the entire county decreased by 1.6 percent, begging the question as to why Sacramento is forcing more homes to be built in such areas.

The good news is that eleven of the 18 cities are now in positive territory, with three of them jumping over the zero threshold during 2022, showing that prudent fiscal management is possible. Why is this important? The deeper the financial hole, the more likely that public safety will be negatively impacted, road maintenance will be deferred, and other critical services, like obtaining necessary permits for minor home improvements, will take longer.

With the median price for a home in San Diego now at $980,000, besides the higher mortgage and homeowner insurance premium payments, a new purchaser will also have to pay a one percent property tax of nearly $10,000 per year. And if the home is in a Mello-Roos District, double it. If the home is in a Homeowners Association (HOA), get ready for the monthly dues.

One would think with rising property revenues, California’s cities would be sitting pretty. But this does not necessarily seem to be the case. Cities also have to pay higher gasoline prices for their police vehicles, including the sales tax and the gas tax assessed by Sacramento for supposed road repairs.

When paying so much for a residence, the last thing a new home buyer needs to hear is that the response time for emergency calls has gone up. Or that, because the city is unable to balance its budget because of ever higher annual required pension plan payments, a request for a sales tax increase may be put on the next ballot.

It could get even worse. The city could even put a proposal for a parcel tax before voters to make ends meet. A parcel tax is usually a set fee charged to every parcel, regardless of its size or value. Over the past two decades, 57 percent of such ballot measures have been approved in the state of California. How’s that for a new homeowner’s gift?

San Diego County residents in the 11 positive per capita cities in 2022 should thank their city councils for prudent fiscal management. Those homeowners in the other seven cities may need to be more active in electing more prudent council members in the future to right the ship of state. And if you’re planning to purchase a home in one of these cities, forewarned is forearmed.

This article originally appeared in The Epoch Times

John Moorlach is the director of the CPC’s Center for Public Accountability. He has served as a California State Senator and Orange County Supervisor and Treasurer-Tax Collector.

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