Apparently, the city of San Rafael wants a new fire chief and the income for such a position ($152,000) is too low for him to be able to afford a decent, middle-of-the-road house in Marin. So, the city of San Rafael has approved to offer him a special low-interest mortgage loan of $600,000 so that their new fire chief can purchase a $1.2 million house. They have also boosted his salary in a number of ways so that his total take-home pay is $179,200 per year. And the justification? According to the city, it is important for people to live in the community in which they work and to be close to family who are located in the area.The San Rafael City Council has offered a $600,000 low-interest home loan to the city's new fire chief, Chris Gray. Gray, who started his $152,000-a-year job this week, is in escrow to buy a $1.2 million, four-bedroom home in East San Rafael's Villa Real neighborhood, just west of Loch Lomond Marina. Escrow is set to close in early October.This is wrong on so many levels. Look, one of the complaints people like me make about the affordability crisis that afflicts Marin, the Bay Area, and much of California is that public servants, like fire chiefs, teachers, etc., cannot afford to buy a decent house in the community they serve. But handing out special mortgages to a few people that we deem as special is not the answer.
"We'd like the fire chief to live in San Rafael - homes are expensive in San Rafael," Mayor Al Boro said [in justification].
The council approved the home loan agreement at its meeting Monday.
The council also awarded Nordhoff a $350-per-month raise and an additional $2,000-per-year contribution to his deferred compensation account. Nordhoff's annual salary is now $179,200 per year, plus benefits.
Gray, 50, who was previously the fire chief in Glendale, said a big draw of the job was to be near family in the Bay Area. He said he says it's important to live in the community he serves.
I mean, what about the firemen and others who work for this fire chief? Should they all get special loans too? No? Why not? Why don't we insist that this guy make some hellish commute from Sonoma or the East Bay or the central valley like we do with so very many other people who work in Marin? What about you and me? I make about what this guy originally came in making, but I don't see any handouts coming my way? Why aren't we offering a $600,000 mortgage to this poor, blind, sick Marin resident facing foreclosure or to anyone else facing foreclosure for that matter? Oh, and 'it is important to be near family and to live in the community in which we work'? (Haven't I been saying the same thing?) Well then, what about all the people who grew up in Marin but who cannot afford to live here, be near their family and loved-ones? Why don't they get special handouts too? Why aren't we telling this new fire chief the same lame story realtors tell other folks -- go buy "the perfect starter home" which comes in at about 800 sq ft in a crappy part of town as that is about all your income can support?
The hypocrisy of this is almost too much to bear.
Look, despite the fact that we Marinites like to apologize for our ludicrous housing costs and hide behind the belief that we are so very special, the problem is that we are suffering from an affordability crisis -- a crisis no matter how much the real estate industry tries to redefine the calculation of affordability and the median sales price. House prices have become unhitched from certain, basic fundamentals such as income. The only healthy way out of this mess is for house prices to fall and fall a lot; not provide designer handouts. The sooner we as a community engage with this the better -- the less of a mess we have to clean up and the less likely someone will come in and force some unpalatable course of action upon us (like affordable housing which we, for some reason, are so vehemently against). What we should be doing is to do everything we can to make sure house prices are congruent with the income of the people who live here and that credit is given out based on proper assessments of risk (and not given out to "anyone with a pulse"). You Mr. Marin House Owner may not like the idea of your house value dropping, but that is exactly what must occur. And besides, if you bought your house to live in, you shouldn't even care.
The Fed, Congress, bailouts galore, and now Marin... moral hazards define our society it seems.
And why isn't the Marin IJ questioning this, even a little? There are issues here that even they should see.
45 comments:
Sigh...don't I recall SR having a "budget crisis"? Whatever happened to that? Maybe their books need a good audit? I'm sure they're going to have more trouble as the re meltdown unwinds.
I'm more than a little disgusted by any city using our tax dollars to directly subsidize one public employee's "Marin lifestyle". Give me a break! Many people who make a direct contribution to Marin, such as school teachers, will never see "lifestyle" perks like that.
Uh, whatever...keep that Marin illusion going, one entitled person at a time. Yeah--house him in Gerstle Park or the Canal district--reality vs. illusion.
Another slap in the face to those of us who work our asses off, make a wage that could buy a nice home almost anywhere else in the nation, yet still can't afford to buy a run down 30 year old apartment that was repackaged as a "condo" in wonderful Marin because people keep artificially propping up the prices.
I am sure glad that the new Fire Chief got his $1.2 mil home, so he could live in the same area. God forbit he would have to settle for a run down 1100sq' house in Santa Venetia for $800,000... oh wait at $152K after taxes and morgage payments, property tax, insurance and making the house livable what would be left over for a couple shiny nice SUV's, vacations, living expenses etc?
Maybe even a Santa Venetia "charmer" would be beyond his means.
This is so wrong on so many levels, and here we go again with the crazy income to purchase ratios.
At $150K year, the Fire Chief is buying at 8x his annual gross income to squeeze into his $1.2MM dream home. Under conventional standards, he'd be qualified for $450K, or 3x gross income.
Seriously, what is wrong with people??!! I'd like to live in a $1MM house too, but I have enough common sense to know I can't afford it, for crying out loud.
Give me a break!
This is some sick stuff.
Even the "big chief" can't afford to live here without crazy subsidies.
Even with "big help", he is in way over his head.
What about his firemen?
I'm sure they will be inspired by his "big deal".
Knock, Knock.... I J ????
Do you have a clue about what this really means?
Now, now people, perhaps the good chief has a Phd in fire safety or organizational leadership or fire truck waxing..
I'm not diminishing the importance of having fire fighters at all, but, please, compare his wages and benefits to our hard working teachers and tell me something is not out of whack...
He must be a gifted politician however..
Ah yes.. yet another fallout of 9/11..
Well, perhaps "fallout" was not the right term... lets substitute that with "overreaction"... oh hell, lets use both...
I will say that anyone with a son or daughter that wants to study economics is very fortunate given the very interesting times we are living in right now... unprecedented really..
In a lot of ways, I see many Presidential candidates employing the same same fear tactics that the NAR and CAR have over the years with respect to running their campaigns... hell, when it works, it works...
I'm reminded once again of that great Apple (Mac) commercial way back when during that Super Bowl... (tossing the hammer or whatever against the screen and shattering it with the zombied audience looking on)...
Just found the following comments from J. Rogers;
Jim Rogers, the commodity king and former partner of George Soros, said the Federal Reserve was playing with fire by cutting rates so aggressively at a time when the dollar was already under pressure.
The risk is that flight from US bonds could push up the long-term yields that form the base price of credit for most mortgages, the driving the property market into even deeper crisis.
"If Ben Bernanke starts running those printing presses even faster than he's already doing, we are going to have a serious recession. The dollar's going to collapse, the bond market's going to collapse. There's going to be a lot of problems," he said.
"The risk is that flight from US bonds could push up the long-term yields that form the base price of credit for most mortgages, the driving the property market into even deeper crisis."
Yep, the 10 year rate is up again today....currently 4.60%, up from 4.47% two days ago, when BB lowered rates. It's CYA. They'll say they did what they could, lowered rates, blah, blah. They don't control long term rates, which is what most fixed mortgage products are tied to.
I'm watching Paulson and BB testify this morning....raise the GSE loan limits, save the FB's. It's disgusting.
If they would let the market do its work, home prices would correct so that we wouldn't NEED suicide financing in the first place.
Exactly Lisa... exactly..
It's all about bailing out and manipulating the conditions within the debt market to benefit the bankers... Paulson is a Wall Street thug himself and has absolutely no clue (nor does he care) about the plight of the average american...
This is all politics and hot air at it's best, but most disgusting..
Leave the markets alone... Prices will drop like a rock, as they should, and lending can return to normal... So what if a lot of bankruptcies result.. what's the alternative? I'll tell you what, we'll be talking about this exact same thing in 3-4 years and more people will be roped into this mess..
My question is why any foreign investor would want to hold depreciating US backed assets. Ok maybe China would because it is hosting Olympic next year and it needs the US economy to stay stable. After that, all bets are off.
"My question is why any foreign investor would want to hold depreciating US backed assets."
Yep. This is why the credit markets have frozen up and the dollar is in the toilet and the 10-year has spiked almost 3% in TWO DAYS since BB lowered rates.
The bottom line is that long term rates will have to be high enough to keep our massive Federal deficit financed every day.
As frightening as all this bailout talk is, it may just turn out to be window-dressing. If marginal buyers and high-risk mortgages are no longer being underwritten, then there's very little to prop up these prices.
Look what happened in today's market. The long term bonds sold off, so did stocks. My guess is that this rate cut actually provides a great selling opportunity for the foreign investors both in bonds and stocks
The 10 year TBill spiked to 4.70% today. That's 5% in 2 days. The international market has spoken about the "wisdom" of BB's rate cut.
Oil hit an all time high and the dollar hit a 30-year low today.
Not hard to figure out what's coming.....anyone check the Marin Heat Index today??
"Oil hit an all time high and the dollar hit a 30-year low today."
And the CAD and USD are now 1:1
I haven't seen that for years!
I also glanced over an article that suggests the Saudis are getting wary of the dollar and won't dropping their rates in tune with the fed. Not the I understand all the implications, but with perhaps BB has run out of his length of rope?
Lisa, yes--the MHI suggests a chilly, early RE winter.
BB was between a rock and a hard place. Wall Street was screaming for a rate cut. Not for J6P, but for the private equity markets, which have also frozen up.
Just wait for Main Street to digest the fact that mortgage rates are going UP, not down, prices at the pump will be going back up, which means everything in this country that has to get shipped will be going up also.
The problem is too big for the government to "bail out."
The 1987 stock market crash was caused by depreciating US dollar, rising interest rates (long-term) and the collapse of junk bonds. Sounds familiar? 20 years later, maybe we are facing the same situation again?
I grew up in Mill Valley and it would mean more than I can say to actually be able to afford to raise my children in the neighborhood where I played as a child. What makes the Fire Chief more special, or deserving than any of us with ties to Marin. It is insane to subsidize this individual's income or mortgage. He can't commute? Come on, I'm stuck in the "affordable" armpit of Sacramento for goodness sake!
I'm going to disagree with many of you.
Personally, I think what San Rafael did for the fire chief is the right thing to do.
Maybe he should even get a big house for free! (this might appeal to some of you confused Marxists of Marin)
Some lives might depend on it. Think of the kind of natural-manmade disasters the Bay Area is known for... least of all, the 25 dead and 3,000 houses that burnt to the ground in the Oakland Hills in October of 1991 - do you really think that can't happen again?
I'm with you on this bubble, but you guys could really use some whine with your cheese.
For all you Ron Paul fans:
"But his [Bernanke's] non-answer is not germane. The element that Ron Paul introduced is: the morality of the Federal Reserve’s constant injection of credit into the system at the slightest hint of macroeconomic distress. And I mean slightest: we haven’t even seen a GDP print below 0. We were only down 4.2% from the ALL TIME high in the Dow (the Fed’s own research suggests that the stock market is the best leading indicator of the economy)....
Bravo to Ron Paul for giving voice to the hundreds of millions or pensioners, savers, working stiffs, poor, fixed income beneficiaries, laborers, gasoline-, bread-, milk-, and egg-buyers who weren’t able to ask Mr. Bernanke why he – like every Fed chairman before him since 1913 – screwed them for the benefit of the top 5% of the population of this country."
http://www.minyanville.com/articles/bernanke-ron+paul-testimony-wall-street-america-dollar/index/a/14185
Or:
http://tinyurl.com/yvgfkb
Scott Reamer runs Union Tree Capital, a Denver-based hedge fund, as well as Scout Research Partners. Previously, he was a sell-side analyst for nine years covering the technology, media, and Internet sectors for Prudential Securities, Bear Stearns, Donaldson Lufkin & Jenrette and SG Cowen.
"Personally, I think what San Rafael did for the fire chief is the right thing to do.
Some lives might depend on it."
BS! He can do his job just fine if he has to commute to Marin, or if he buys what his income can actually support, or if he, heaven forbid, rents.
Marin crapped its own bed and has to sleep in it.
If Marin is going to hold as sacrosanct its precious house values, then it has to face up to the problems it has created for itself... and the fact that most everyone, even Fire Chiefs, will have to sacrifice if they want to work and live in Marin.
Here, take a look at this quote and the links, and tell me that if you were living in San Rafael you'd want a fire chief with a long commute.
http://en.wikipedia.org/wiki/Oakland_Hills_firestorm
Or:
http://tinyurl.com/2wcxtj
"The fire started on Saturday, October 19, from an incompletely extinguished grass fire in the Berkeley Hills northeast of the intersection of California State Routes 24 and 13 (0.5 mi (0.8 km) north of the Caldecott Tunnel west portal). Firefighters fought the five-acre fire on a steep hillside above 7151 Buckingham Blvd., and by Saturday night they thought everything was under control.
The fire re-ignited shortly before 11:00 am on Sunday, October 20. It re-started as a brush fire and rapidly spread southwest driven by wind gusts up to 65 mi (100 km) per hour[1]. It quickly overwhelmed local and eventually regional firefighting resources. By 11:30 a.m., the fire had spread to the nearby Parkwoods Apartments located next to the Caldecott Tunnel. Shortly before noon the fire had been blown up to the top of Hiller Highlands to the west from where it began its sweep down into the Hiller Highlands development and the southern hills of Berkeley. The fire tossed embers from the burning houses and vegetation into the air as it went. These embers were swept away by the torrid winds only to float back to earth to start the blaze in new locations. Half an hour later, these embers enabled the fire to jump across both Highway 24, an eight-lane freeway, and Highway 13, a four-lane freeway, eventually igniting hundreds of houses in the Forest Park neighborhood on the northwest edge of the Montclair district and in the upper Rockridge Neighborhood. The fire eventually touched the edge of Piedmont burning some municipal property, but no buildings or houses.
The hot, dry northeasterly winds, dubbed by the media at this time as 'Diablo winds,' periodically occur during the early fall season. The fire began generating its own wind, the defining characteristic of a firestorm."
Nero:
Based on your logic, the entire San Rafael Fire Department should be given subsidized housing. Maybe you would support that too, but I doubt most of us taxpayers would, especially those of us who don't yet own a home.
I love the irony of all this free market talk coming from Marin. Let the markets sort it out, no subsies..
So what do folks here think about universal health care, farm subsidies, medicare, medicaid etc?
While I agree that bailing out shady lenders and unscrupulous borrowers is not a great long term strategy I do wonder if the free market vibe here extends to other parts of the economy..
"Based on your logic, the entire San Rafael Fire Department should be given subsidized housing. "
No, San Rafael should be in favor of subsidizing housing for the entire fire dept. That's San Rafael's logic.
Isn't it a bit of a false dilemma to suggest the fire chief should get a housing subsidy--or the safety of San Rafael will suffer? Certainly there are many other options that don't involve city handouts. As another logical bifurcation, perhaps the chief assumes he needs to "buy now or be priced out forever"? And we know how well that one stands to scrutiny.
Oh btw--one reason the Oakland hills fire was so destructive was that a pumping station was shut down by the initial blaze--but not fixed before the blaze took off again...something a fire chief told me whose crew was called in for that fire. He thought most of the damage was preventable.
"Isn't it a bit of a false dilemma to suggest the fire chief should get a housing subsidy--or the safety of San Rafael will suffer?"
Of course and that is my point. He can do his job just as well if he had to commute in from Sonoma or wherever, or if he lived in a house that his salary could afford, or if he rented... No need for marin to do what they did
I think that it is far easier for San Rafael to give the Fire Chief a subsidy than for them to have to face the embarassing fact that a $152,000 salary is not sufficient to buy a decent house in Marin.
And does that make me a "confused Marxist"? LOL!
"....embarassing fact that a $152,000 salary is not sufficient to buy a decent house in Marin..."
Embarassing? How about sheer lunacy!!
And what he bought is at 8x his annual income. So the city of SR has decided to embrace that as well, and to pay for it with local tax money??
The sense of entitlement here is laughable. I hope he enjoys his new-found debt serfdom.
Hey Marin_Explorer,
it seems to me we need Yun's face superimposed on Bagdad Bob now. Are you up for it again? The last one was a big hit on the 'ol internet.
I'm very happy!
I figured it out!
I want to buy a house in Mill Valley.
I signed up for an online "Fire Chief" training course.
It is pretty hard, but if I stick it out, I can get my certification.
I know the Mill Valley terrain pretty well, so I'm sure that once I'm certified, they will hire me as Fire Chief.
When that happens, I'll mention the San Rafael policy and I'm sure they will give me a big house loan too.
I think I've cracked the affordability problem.
You all are welcome to do the same but...
I've got dibs on Mill Valley.
Sorry Nero. I did not see the quotation marks in your post. I should have directed my comment to SF Jack.
Marinite,
Mrs. Dawg and I give you permission to use our picture in this post. Thank you housing bubble.
Anyway, maybe the town should buy a few houses and do like big cities do for the mayor. A Fire Chiefs house, a Police Comissioner house, etc.
The blindness of this action amazes even me. Here's what they should have done; nothing. No fire chief and tell the people until they get their sh¡t together they better learn to live with it.
A couple of facts to keep in perspective:
1) The City Manager is fulfilling the policy directives of the City Council in offering the new Fire Chief a housing loan.
2) The City Council has made a policy decision to have the fire chief live within the city limits. As you may recall, the Council wanted the last (non-interim) fire chief to live in town. In 2004, the City offered Fire Chief Bruce Martin a similar loan package of $600,000. After 18 months of searching Chief Martin was unable to find a home and left to become the Fire Chief of Fremont. Chief Martin is considered to be one of the top Fire Chiefs in the State of California and his loss was a blow to the fire department, the City and especially the community.
3) San Rafael is in competition for a limited pool of qualified Fire Chiefs who have demonstrated competencies and success in running a Fire Department. The housing loan gives San Rafael an edge in the job market. The demand for qualified Fire Chiefs is high and the supply is low – it’s that simple.
4) San Rafael is not unlike many other cities, counties, school and special districts who offer department heads housing assistance in the form of loans, monthly financial housing stipends or even free housing. For example, the Fire Chief of San Francisco lives for free in a city provided home with a 24 hour a day driver.
5) If my numbers add up, it appears as if the new Fire Chief is using his own money or financing to cover half the purchase price. This is unusual, in that most agencies provide 100% financing for department heads.
6) The City of San Rafael is investing in its Fire Chief. State law requires municipalities to invest their money in extremely secure investments, such as government bond pools or money market funds. The City is getting 5.25% on their money by investing in their Fire Chief.
7) Your average firefighter could purchase a small home or condo in Marin County. The vast majority of them, however, can get more “bang for their buck” by moving to outlying areas such as Vacaville or Sacramento. The firefighters’ work what is called a 2 by 4 schedule. What that means is that they work 48 hours on duty followed by 96 hours off duty. In one month, a firefighter would commute to and from work a total of five times.
8) It would be great if all City employees were offered the opportunity to get into homes with housing assistance, but this isn’t the reality. The only agency that I’m aware of who has even come close would be the North Marin Water District. I believe they have provided some form of housing assistance to 75% of their employees to reside within their service area in North Marin. Having the moderately priced homes on Hamilton certainly helps.
My opinion – San Rafael has landed a well respected, highly qualified fire chief to move the department and community forward. Had the IJ done their research, they would have found that housing assistance is quite common. The IJ singled out one individual, the new Fire Chief, rather than examining the policy makers, the City Manager or looking at other agencies. If it means investing some of my tax dollars to attract and retain a department head in charge of our public safety, then I say good job!
And what he bought is at 8x his annual income.
To be fair, he's 50 years old, and the subsidized loan is $600k, so obviously he must have had a lot of equity rolled into the house from his previous residence, and the loan amount is only 4x his income.
This creates what amounts to a ruling class. The moral hazards are beyond description.
"To be fair, he's 50 years old, and the subsidized loan is $600k, so obviously he must have had a lot of equity rolled into the house from his previous residence, and the loan amount is only 4x his income."
The 3x - 4x income rule of thumb applies to home price, versus how much someone finances. Does he have the other $600K? Or is he getting part of his financing from somewhere else? We don't know.
But do the math....it's tough to pay off that much house, and we're not talking about a 30 year old just starting off, we're talking about someone in his 50's.
The choices people make just continue to amaze me. How about a small mortgage at that age, or NO mortgage at all??
Does he have the other $600K? Or is he getting part of his financing from somewhere else? We don't know.
That is right. We don't know where the other $600K is coming from. But it doesn't matter. That's not the point.
The point is what San Rafael (really, any other town in Marin for that matter) has to do in order to retain key people in our over priced market. Like someone else previously said, Marin has "crapped its bed and has to sleep in it".
This creates what amounts to a ruling class.
As usual Robert, you hit the nail on the head.
The 3x - 4x income rule of thumb applies to home price, versus how much someone finances.
Nonsense. That's a crude rule of thumb that makes a lot of assumptions about the downpayment and prevailing interest rates. Should a person making only $100k not buy a $1 mil house for cash because of this "rule"?
A more realistic rule, used by many lenders for decades, is PITI as % of income. 1/3 is not an uncommon ratio, and some would even push it to 40% for someone with a higher income (on the assumption that basics like food, gas, etc. are a smaller fraction of the person's income).
Interest rates are still historically low, and from what I can see, a $600k loan is within the means of someone on a $152k salary. That salary is around $12.7k per month, 1/3 of which would be around $4.2k, which is enough to service a $600k loan at 6% and pay the prop taxes on a $1.2 mil house.
By the way you're assuming the $152k is his total income, no investment income, spouse makes nothing. Bottom line, I don't think the chief actually needs the subsidized loan, and I would not be surprised if it was simply negotiated as a way to give him higher overall compensation.
"If it means investing some of my tax dollars to attract and retain a department head in charge of our public safety, then I say good job!"
*****
I agree with bucket's statment.
I don't live in San Rafael, but if I did I would favor having perhaps the most important person for the public's safety be well-qualified and a community member.
And that doesn't mean I'm saying every public safety person for San Rafael has to live in the city. The leadership in those positions should be residents if only because it could make them more effective in times of crisis (an example being the Oakland Hills as I mention above).
If Ben Bernanke can imply "moral hazards be damned", then in this case, so will I.
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