Proposition 13 strikes again. Not to worry, San Diego filed for bankruptcy back in the early 90's, it survived.
It wasn't San Diego, it was Orange County. And that was because of bad investments. The biggest ever city in California (before Vallejo, which is 118k) was a city outside of Palm Springs. It's bounced back as well, though.
Having lived in California for a while, I'm of two minds on Prop 13. In many ways, it has benefited smaller property owners, including stores and restaurants, by keeping the tax rates relatively stable. It does mean that California has a very high sales tax. And so it's really the sales tax that's hurting Vallejo. And it probably has encouraged counties to build way out from the center more, new building is assessed at a higher cost.
Also, because Prop 13 covers all areas of revenue generation -- not just property taxes -- it means that almost everything is voted on. You can't raise taxes, sell bonds, add new tolls to bridges, etc. without approval from the voters. Sometimes two-thirds (depending on the type of tax).
It does but a limit on things, and perhaps has artificially inflated the cost of housing, there is nothing to reign the prices in, although it certainly allowed my family to live in Santa Monica from the 1950s until the 1990s without having to sell. The 1970s saw rapid property value increases while simultaneously rapid tax increases. It's really San Jose that got the whole Prop13 thing going by constantly raising taxes to build more roads.
Prop 13 pushes all revenue through the State Board of Equalization for the most part, which is an odd thing, really. Makes for a very powerful state agency. This means that California is not just really dependent on sales taxes, but also on income tax and other fees. And with California now facing a $20B (with a "B") deficit things will probably only get worse. California is way more cyclical than other states. It's always extreme highs followed by real rough patches.
Vallejo, like many Bay Area cities, is pretty liberal. And so has given huge pay raises to all of its unionized employees. I am a little startled by MoCo's 80% payroll that Richard mentions above. As Vallejo is 74% and it seems that is part of the problem. That's high even by California standards. So MoCo is off the charts. Of course, taxes are higher on the East Coast -- it must all go to labor.
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