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You have to read a bit between the lines, but Fitch Ratings, in coming out with new bond and note ratings for the City of San Diego, warns that tax increases or other revenue enhancements are coming. The good news: Fitch gives the City's tax and revenue anticipation notes its highest F1+ rating. Fitch affirms prior ratings on other San Diego paper. Fitch's highest rating is AAA, second highest AA, third highest A. San Diego's general obligation bonds get a reasonably good AA-. But various certificates of participation and lease revenue bonds get an unimpressive A+.

Fitch says San Diego has a diverse economy and is a desirable location. But as the unemployment rate has jumped, "the City's key general fund revenue sources have declined," says Fitch. "Absent revenue increases to offset rising pension payment costs, the city is delaying progress toward achieving its reserve level policy goals." The City's five-year outlook forecasts operating deficits out to 2015. "While the City has a record of solving such deficits without adversely affecting its general fund balances and reserves, THE OPTIONS AVAILABLE TO IT WILL DIMINISH OVER TIME ABSENT SIGNIFICANT REVENUE INCREASES." (Emphasis mine.)

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Comments

Visduh June 8, 2010 @ 11:41 a.m.

Fitch is probably right in that San Diego doesn't have the sources of revenue necessary to support what it wants to be and what it wants to provide in services to the public. But just raising taxes is not the answer, even if the public is willing to vote for them. Too many voters will decide that somebody else will pay the tax, not them, and decide that it sounds like a good idea. The problem is that once imposed, those taxes encourage the better-off residents to avoid or evade them. The best way to avoid paying is to flee the jurisdiction. This is happening now at the state level due to the high state income tax. Any such tax boosts will need to be carefully nuanced, and San Diego has not shown much ability to nuance anything of late.

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SurfPuppy619 June 8, 2010 @ 12:16 p.m.

The problem is that once imposed, those taxes encourage the better-off residents to avoid or evade them. The best way to avoid paying is to flee the jurisdiction.

It also encourages the City to just keep misusing the taxes, giving retroactive pension increases, big yearly raises to the employees while everyone esle remains stagnant, bigger benefit packages-they know all they have to do is seek a taxpayer handout to cover their largess instead of them making tough choices.

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SurfPuppy619 June 8, 2010 @ 12:19 p.m.

This is happening now at the state level due to the high state income tax

The sales tax when I was growing up was 6%-and everything was paid in full, with much better services and much lower costs for those services.

Higher education was almsot free in CA during my years growing up.

Today the sales tax is 9.5-10% or more depending on the county, an increase of over 60%, yet we are in the hole tens of billion every year, why?

What has changed??? Employee comp-that's what.

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Don Bauder June 8, 2010 @ 12:23 p.m.

Response to post #1: All the disadvantages of higher taxes you cite are valid. They get dodged, the rich evade, rich and poor alike flee the jurisdiction. But when you are as revenue-deficient as San Diego, you just can't continue slashing services, ignoring infrastructure and maintenance, etc. Best, Don Bauder

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Don Bauder June 8, 2010 @ 12:25 p.m.

Response to post #2: Your objections are valid, too. Once the tax money rolls in, government waste and political vote-buying increase. But sometimes you can do nothing else. Best, Don Bauder

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Don Bauder June 8, 2010 @ 12:28 p.m.

Response to post #3: SP, you will want to read the grand jury's report suggesting that San Diego consider BK. It goes into a lot of detail about the pension woes. The report came out today. Best, Don Bauder

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