California real estate Armageddon

It seems that California cities are embracing the notion of play now pay later when it comes to school district bonds and construction improvement bonds.

This is the ideal concept for local government officials. They can give their constituents new facilities and improvements without any current cost or tax increase. By the time payments become due, the current politicians will no longer be in office, most likely moved on to state or national elected positions or retired and receiving a bloated pension.

But let’s just consider the city of Poway California, where in 20 years their monthly payment will be approximately $1 million per week to pay off a school district improvement bond. Yes, their total payments starting in 20 years run about $50 million per year!

California Real Estate – Would you want to relocate to the city of Poway now?

How will the city of Poway be able to make the huge payments? Actually, it looks like there are only be three options: issue some new bond in 20 years to try to repay the existing bond, levy huge property taxes on the city real estate owners, or declare bankruptcy and have the bankruptcy court set up some type of repayment plan which will have to be based on tax increases.

But, as the news of this crazy ‘kick the can down the road’ tax payer scheme gets national notoriety, how many potential home buyers are going to consider moving to Poway now? Yes, the negative real estate repercussions may already be taking hold.

California Real Estate