Tuesday, July 21, 2015

California tries to eat itself.

All of you may have heard that we (California) are in a big giant drought. I'm sure it comes as no surprise that the water districts have started handing out big fat giant fines. Read: California proposes historic $1.5M fine for taking water.

I've read countless articles about this topic because it stomps on senior water rights holders. What I find really fascinating though is very few articles talk about how this fine is a huge problem for CALPERS. Oh yes it is.

You see, the district which is most affected by this fine is a little city called Mountain House in the East Bay. At one time during the heat of the recession 90% of homes there were underwater. No pun intended. We referred to it as California's ghost city. I blogged about it here. At the time people would report moving vans pulling up in the middle of the night and families would just disappear. I went out there when only 46% of the town was in foreclosure in 2007.

This is the kicker though. Mountain house is owned by CALPERS. Normally this might not be a problem, but apparently Mountain House is only 1/3 built out. And they need to keep building to pay back their bond holders for infrastructure and a water treatment plant. Yet the water district is fining the shit out of them. Which is sort of awkward because the people doing the fine-ing most assuredly belong to CALPERS.  I guess people still aren't hip to those pension cuts that a lot of bankrupt States have endured lately.

Naturally I had to go over and see what houses are going for out there now because right before the crash they were selling for around 950,000. The most expensive house I could find was just still shy of 600,000. From time to time I still read that around 15% of homeowners are still underwater and I try to figure out who this demo is. It was a really painful time, so I don't know how many people held out - but apparently that demo is still in Mountain House and is probably owned by the California Public Employees' Retirement System.

After the recession I started paying a lot more attention to CALPERS. Not because I have a public retirement account, but because CALPERS played a huge role in the housing crash. In 2008 the Wall Street Journal claimed the CALPERS real estate portfolio was bigger than the government-run funds of Russia, South Korea, Dubai and Chile combined.

This might not be big enough to get your panties in a bunch about except that the general manager of Mountain house said this: “If we’re not growing, we’re dying,” said Pattison, whose district provides water and other services to the unincorporated community. A moratorium on new houses could bring on a “financial death spiral” that would be “more catastrophic than the 2007 crash,” he said. Source.

I hope he means just for that city, but CALPERS has it's tentacles in everything.

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