Berkeley faces a serious fiscal crisis. Years of deferred maintenance and postponed improvement have left Berkeley with a massive infrastructure deficit. The state-level looting of the CalPERS pension fund, compounded by the financial fraud crisis of 2008, has saddled Berkeley with an overwhelming, unfunded retirement benefits liability.
All nine members of the City Council and every attentive resident of Berkeley with a lick of sense knows these problems.
The only possible saving grace is that this fiscal crisis will unfold somewhat slowly, only as the bills come immediately due. Berkeley has some time to try to work its way out of the problems.
In the short term our fiscal problems will be partially addressed by further reductions in service and payroll. If the city is to remain solvent this appears to be the only choice. In other words: if the public facilities and services have seemed to grow a little shabby around the edges over the past decade, know that they are going to become worse.
Cuts alone can't solve the big problems, though, and neither can raising taxes. Berkeley must find ways to grow its revenues.
There is a very clear strategic issue at stake here that isn't coming across clearly enough in the news and public debate. What is the best way to grow revenue?
Is the best course to encourage land speculation to collect windfalls of transfer taxes and development fees? This seems to be a strategy favored by the council majority faction.
On the other hand, is the right direction to try to grow taxable business incomes?
Can the city do both?
The two biggest sources of general fund revenue for the city are property-related taxes and fees on the one hand; sales taxes and business license fees on the other.
The council majority is strongly aligned with groups that reflect the interests of major commercial land owners. And this is where a kind of strategic distinction should be drawn because the council majority is apparently going all in trying to temporarily boost transfer taxes and development-related fees to kick the budget problems down the road.
The opposing strategy is one that emphasizes the *other* major revenue source: sales taxes and business fees.
It comes down to a difference about what kind of economic activity to aim for and encourage. The council majority want to encourage flipping and speculative development of expensive land. The counterpoint strategy is to encourage and invest in expanding Berkeley's business income. Do we make a priority of growing transfer taxes for a few years? Or growing business license fees and sales taxes for many years?
It's a difference between asking for private investment in property and asking for private investment in people and a healthy economy.
The development side tries to say that development *is* how to grow business income. They say "Let's do both and the way to to do both is to build. Through development and land speculation, business incomes will later grow."
Yet, look around town. Look at the commercial vacancies. Look at the failed projects. Look at the anemic retail sector.
The strategy of "if you build it they will come" is a palpable failure. Not only is it leading to dubious changes to the built environment but the land speculation they are encouraging is *crushing* Berkeley business income with outrageous rents
Thirteen years ago when the current General Plan was adopted with broad participation, the people of Berkeley saw this coming. Looking back at the then recent experience of the 1990s boom times they saw that rapid inflation in the price of urban land threatened to devastate the economy of Berkeley, it's neighborhoods, its communities, and its strong arts culture.
With that in mind they tried to orient the city to be cautious about development and to leverage development pressures to protect and enhance the Berkeley economy, not bury it in high rents. They emphasized economic development meaning expansion of jobs, expansion of opportunities to create new businesses, and expansion of business incomes.
Thirteen years ago the wise citizens of Berkeley even recognized that a thriving industrial sector was vital not only for jobs, but so that exports not household incomes could pay for more of the city's operations.
In the thirteen years since the plan went into effect the land-owner factions have held power. They've done the opposite. They twisted the plan around, paying only lip service at best to economic development and are doing everything in their power remove all barriers to development projects -- to encourage land speculation.
Having neglected infrastructure, the expansion of Cal, and the looting of Calpers this land-owner faction now wants to double down on destructive patterns of development to temporarily paper over their neglect with a few one-time transfer and development fees. Maybe squeeze just a little more property tax out of the city.
It's time for progressives to articulate a platform that isn't anti-development but that is pro-business and above all pro-people. It's the economy, stupid, and fantasies that a few more hotel rooms and a handful of micro-apartments will somehow turn Berkeley around are short-sighted, naive, and cynical.