Civic Pride Can Ease Debt Woes

As the economy slows, many families are coming face to face with the reality of excessive debt. Flush with overtime, bonuses or healthy investment gains, many families splurged during the good times.

For some, the SUV payments are now a little too dear, the mortgage is now a little too high, and the income necessary to carry the debt load is now a little short. Other families have largely avoided debt and are probably breathing a little easier for it.

Like families, cities in Orange County are facing different debt situations. Some have been pretty quick with the credit card; others have been much more circumspect. A look at the numbers reveals a wide variation in the debt structure of Orange County cities.

Anaheim is far and away beyond any other Orange County city, with over $1.2 billion in total debt outstanding. No other Orange County city even comes close. Santa Ana is next up, with almost $300 million in total debt, followed by Irvine with debt of a little over $250 million, and Brea with about $215 million.

By way of contrast, Newport Beach, with a little under $25 million in total debt, and Fullerton with somewhat less than $24 million, have less than 10% of Irvine’s debt. La Habra, Cypress and Mission Viejo have less than $10 million in debt, and some of the newer South County cities are virtually debt-free.

Total debt data are important, but it is perhaps even more revealing to look at the debt load on a per-capita basis.

By this measure, Brea, with a debt load of $6,153 per capita, has the highest debt in Orange County. Anaheim is next with debt of $4,293 per capita. Irvine has just over $2,000 in debt per capita, followed by Tustin with $1,695 (and a total debt of over $105 million). Taxpayers in each of these four cities are financing even more debt when various utility and other public facility debt is thrown in.

Santa Ana, Yorba Linda and Orange have per-capita debt of between $990 and $960. Garden Grove, Westminster and Fountain Valley are clustered between $715 and $645 in per capita debt. Fullerton, Costa Mesa, La Habra and Cypress all have per-capita debt between $200 and $100. Other cities have even less.

Of course, prudent use of debt, by cities as well as by families, can enhance living standards substantially. Just think how long you would have to scrimp and save if you had to pay cash for a house. The trick, for both families and cities, is to live prudently within your means and only incur debt judiciously.

What is the prognosis for the high-debt cities? Anaheim is a destination tourist area, with Disneyland the tiara in the municipal crown jewels. The city benefits directly from the park itself, the symbiotic convention center and the taxes generated by restaurants, stores and especially from the bed tax paid by guests at surrounding motels and hotels.

Brea’s situation is more problematic. Its aggressive use of debt has transformed the town into a vibrant suburban city, but servicing that debt in an economic downturn could force some unpleasant choices.

Irvine, squarely athwart the increasingly affluent suburban growth that is the hallmark of Orange County, is in better shape. The flourishing business district is superbly located, and, ironically, bolstered by its proximity to John Wayne Airport.

Santa Ana, which some may dismiss too quickly, is showing some interesting innovation in recasting its historic downtown as an arts community. It is not unrealistic to think that Santa Ana, with its rich demographic tapestry, might become the lively urban soul of Orange County.

Each of those cities could benefit from a little direct citizen involvement. If you live in Anaheim, encourage friends and relatives from out of town to come to Disneyland, stay in local hotels and take you out to dinner. If Uncle Walt’s is not their style, take them to the Doll Hut or a Mighty Ducks hockey game.

If you live in Brea, encourage your neighbors across the county line to shop at your mall and visit your new downtown. If you live in Irvine, think carefully about incurring more debt and be attuned to business concerns. If you live in Santa Ana, join your neighborhood watch, support your police department, and encourage the ethnic and artistic businesses in town.

Voters throughout the county should also think carefully about whom they want in the Legislature or Congress. When evaluating candidates, look closely at their records in local government. Can you trust them with your credit card?

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Steven Frates is a fellow at the Rose Institute of State and Local Government at Claremont McKenna College. He lives in Newport Beach.