Merced Sun-Star
Drop puts houses in grasp of most
Huge price decline makes homes affordable for 71 percent of families...J.N. SBRANTI, The Modesto Bee
MODESTO -- Stanislaus County homes are the most affordable in California, followed by Merced and San Joaquin counties, a study released Thursday shows.
That's the good news.
The bad news is that home sales prices plunged again in January, pushing values back to what they were in autumn 2000. Stanislaus home prices, for instance, have fallen nearly 65 percent since peaking in December 2005, and Merced and San Joaquin values have dropped even more.
Housing statistics from various sources keep demonstrating how drastically things have changed in the valley.
New calculations show that Stanislaus' median-income families can afford to buy 71.1 percent of homes on the market. Three years ago, before the housing bubble burst, only 3 percent of Stanislaus homes were affordable to median-income families.
Most homes also are affordable in Merced (70.9 percent) and San Joaquin (66.4 percent).
That's terrific for first-time buyers such as Tammy L'Allier.
"I have a fairly decent job, but I never thought I'd be able to afford my own home in California because I've always been a single mom," said L'Allier, 47. So she was shocked last summer when she saw a home for sale in her price range. "I thought: Oh, my God! I could actually afford that." She started searching, and by October she bought a $129,000 home on Estep Drive in central Modesto. The foreclosed house, with more than 1,600 square feet, costs her only about $150 more per month than what she had been paying for rent. She expects to save at least that much in income tax deductions.
"I still can't believe it. Now I can own dogs and paint my walls any color I want, which I couldn't as a renter," said L'Allier, who has painted her living room dark chocolate and put black stripes on her bedroom walls. "I love it!" Andy and Amanda Baker, of Modesto, also are thrilled. They bought their first home in December for $123,000, and their monthly payment is just $930.
"We're so thankful we were able to do this," said Andy Baker, 38, who is an adoptions social worker in Merced County. He and his wife, who is 36 and works with developmentally disabled adults, expressed sorrow that their Carol Street home's previous owner went into foreclosure. "It was hard to buy knowing someone else lost this home," he said.
But the Bakers, who have two children, had been frustrated for years as they watched home prices soar out of reach.
"We were ready to settle down and get that first home," said Andy Baker, who was raised in Merced County. He advises others to consider buying now, but he cautions: "Make sure the home is within your ability to pay for and that it's someplace you want to live."
The National Association of Home Builders/Wells Fargo Housing Opportunity Index, released Thursday, shows how the Northern San Joaquin Valley has flipped from being among the nation's least affordable places to buy to being among the most affordable.
Loose Lips:
Leaders learn what not to do at Capitol
Usually, Bill Spriggs, a Merced councilman and part-time government lecturer, revels in his chance to meet with the state's movers and shakers during the annual pilgrimage to the Capitol known as One Voice.
This year's trip, however, wasn't full of riveting discussions on block grants and enterprise zones.
"I've never seen Sacramento more dysfunctional," Spriggs told his fellow city lawmakers Tuesday.
Between the state's bonds being rated as junk and cash running dry, the trip was less than reassuring that the Golden State isn't actually made of pyrite.
Lawmakers are talking more and more about tying funding to new kinds of fees (shhh ... they're not taxes).
There could be fees on water usage. Fees on toilet flushes. Heck. There's even talk of putting meters in cars to charge people based on their mileage!
"It's pretty discouraging," Spriggs sighed.
Fortunately, Mayor Ellie Wooten, the eternal optimist, didn't seem to share the sentiment. "Thank you, Councilman Spriggs, for that ray of joy," she said.
Now you see it ...
Riverside Motorsports Park, our favorite project that's still moving forward, has inexplicably removed from its Web site the quotes from local business folks who backed the track.
They'd been cycling through for the past several years, hyping all its potential. A couple gems:
"Riverside Motorsports Park is a great opportunity for students to find jobs that are flexible around classes," attributed to Jeff Pennington, president, Merced County Chamber of Commerce. (He's no longer the chamber prez.)
"The economic benefits of the project are quantifiable, immediate, far-reaching and long term," attributed to Scott Galbraith, Merced County Economic Development Corp. (He's still working to revitalize the local economy.)
The box where the quotes appeared now reads: "It's more than a racetrack ..."
So much more.
Dark economic clouds or not, group pushes for UC Merced medical school...KEN CARLSON, The Modesto Bee
MODESTO -- The state's economic troubles would seem to undermine planning for a medical school at UC Merced.
But the 290-member Valley Coalition for a UC Merced Medical School believes it's an opportune time to push for the project.
The group is encouraged by President Barack Obama and congressional leaders who want to invest billions to improve the health care system.
"You have a group of folks in Washington that is about the business of rebuilding America," said Rep. Jim Costa, D-Fresno, an advocate for the medical school. "Because of the steep economic challenges we are facing, there will be an opportunity to invest in our long-term needs, our infrastructure and our health care needs."
Rep. Dennis Cardoza, D-Merced, and Costa formed the coalition a year ago to generate support for the medical school.
It consists of representatives from the eight counties in the San Joaquin Valley and Mariposa County.
In a meeting Thursday at Doctors Medical Center in Modesto, the group passed a resolution asking the University of California Board of Regents to establish the medical school by 2015.
That's five years earlier than the timetable recommended by the Washington Advisory Group, which was hired by UC Merced to outline a plan and concluded the recession was cause for delay.
The coalition supported, in concept, the three-phase Washington Advisory Group plan that was released in January.
The phases include:
Establishing a biomedical education track at UC Merced as early as 2010.
Teaming with University of California, Davis, to establish a branch medical school at UC Davis as early as 2012.
An independent UC Merced medical school no later than 2020.
Along with a shorter timetable for launching the medical school, the coalition recommends including the UC San Francisco medical school extension in Fresno in the medical and clinical education provided in Phase II.
It also wants to emphasize medical research at UC Merced and called on the UC system to fund the three-phase program.
The coalition also announced it will use a $147,000 California Endowment grant to continue the planning process.
The grant will ensure that Valley communities are involved in planning for the medical school through community meetings and other outreach.
Proponents say the UC Merced proposal would produce doctors for the San Joaquin Valley and foster research, thereby improving care for heart disease, cancer, diabetes, asthma, valley fever and other diseases.
Cardoza said that national health care reform is a pipe dream if there are not enough doctors to treat patients.
UC Merced won't likely get any of the $500 million for medical education in the federal economic stimulus package, he said.
But the White House and Congress are talking about more health care spending.
Dan Dooley, a spokesman for the University of California President Mark Yudof, said the office supports the first two phases of the Washington Advisory Group plan and is leaning toward implementing Phase III.
Yudof's office has also considered a medical school at University of California at Riverside.
"I don't discourage the coalition from pushing (UC Merced) to make sure we keep on track," Dooley said.
Dr. Fred Meyers, executive director of medical education and academic planning at UC Merced, said the negotiations with the UC system are now over funding and the timetable. Establishing the medical school will require a combination of government funding and philanthropic contributions, he said.
"It is all a question of resources," he said. "Recruiting the finest doctors and researchers takes money."
Fresno Bee
Valley growers to get bad news on water deliveries...Mark Grossi and Robert Rodriguez
West Valley farmers Friday will hear the news they have feared for weeks — an unprecedented forecast of no federal water for their multibillion-dollar industry.
Farmers now must shift into survival mode, pumping ground water to keep orchards alive and leaving bare dirt where tomatoes, onions and melons grew in previous years.
“People are going to be using every available ground-water well and trying to get by,” said Sarah Woolf, spokeswoman for Westlands Water District, the largest of the affected districts.
One Westlands farmer, Joe Rascon, will cut his cotton crop by 75%. “It is going to be a nightmare,” he said Thursday.
Even if there is a lot of rainfall in the next several weeks, west-side farmers can expect only 10% of the water they want. The lowest previous delivery was 25% during two drought years in the early 1990s.
The announcement Friday stems from complex problems, including three consecutive dry winters and reduced water pumping to protect dwindling fish in Northern California rivers. West siders get water from northern rivers through canals belonging to the federally operated Central Valley Project.
The bad news was shared privately Thursday with legislators in Washington, D.C., and some Valley water leaders.
It is the first water-delivery forecast of the season, water officials said, so a stormy late winter and spring may change the picture. The U.S. Bureau of Reclamation, owner of the Central Valley Project, usually modifies the forecast in March and April.
Stormy weather over the past two weeks has added to the Sierra snowpack, but the 400-mile-long range is still far behind — about 75% of average for this date.
Valley water officials say Friday’s forecast will not settle one troubling question: Will east-side farmers have to give up some of their San Joaquin River water for west-side farmers who have high priority under decades-old contracts?
If the high-priority west siders — known as exchange contractors — cannot get their allotment of imported water from Northern California, they can legally get water from Millerton Lake, near Fresno.
That has never happened, and east-side farmers, who irrigate with water from Millerton Lake, would lose water in that event. East siders today also will hear news about their San Joaquin River forecast — 25% for their high-priority farmers in the Friant Water Users Authority and zero for their lower-priority farmers.
“We would like to see a lot of storms in the next several weeks,” said Ron Jacobsma, Friant general manager. “If there is a call on Friant water from the exchange contractors, we could have very tight water supplies this year.”
West-side cities, such as Coalinga and Huron, will be told to expect 50% of their usual allotments, officials said. Many other west-side cities get their water from wells.
Most leaders in west-side communities knew bad news was on the way. Mendota Mayor Robert Silva wonders how much more his farming community can take. He estimates that 80% of his city’s economy is tied to agriculture.
The city’s unemployment rate is 40%. Silva said he is working with social service agencies to distribute 1,000 boxes of food next month. “But that will only be a Band-Aid,” Silva said. “It will only last for a few days.”
Experts work to combat deadly amphibian fungus...LORINDA TOLEDO, Associated Press Writer
LOS ANGELES The tiny Panamanian golden frog, with its sunflower yellow skin and dark brown spots, is usually a symbol of good fortune.
But it appears the tropical frog's luck may have run out unless experts find a way to combat a deadly fungus threatening amphibian populations around the world.
"This is not a natural extinction event," said Allan Pessier, a scientist from San Diego Conservation Research, which has been researching the spread of the chytrid fungus. "It is caused by humans, and it is our responsibility - almost our moral responsibility - to do something about it."
Twenty-five of the world's leading amphibian veterinarians, disease researchers and animal care specialists convened this week at the San Diego Zoo to write a definitive conservation manual to combat the spread of chytrid fungus.
Thought to be caused by the exportation of amphibians from their natural habitats, the fungus is killing off amphibians at an accelerated rate, Pessier said. The golden frog, for instance, is believed to be extinct in the wild, when years ago thousands of them inhabited Panama.
People would often find them in the forests and keep them for good luck. Now, the golden frogs and other amphibians are threatened by the spread of the microscopic fungus, which attaches to the animal and thickens its skin, making it more difficult to absorb the water they need.
The problem started off slowly in the 1930s, when frogs were widely transported to other countries for medical purposes, food and pets, Pessier said. By the late 1990s scientists realized a solution was needed.
Working long hours throughout the three-day conference that ended Wednesday, experts created an 80-page guide for bringing threatened species of amphibians into captivity and testing them for disease.
The guidelines are intended to prevent the spread of the fungus to healthy amphibians already in captivity and conserve rare species, Pessier said. Experts hope they can later be reintroduced into the wild.
Central America, South America and Australia are some of the regions most affected by chytrid fungus, Pessier said. Some North American amphibians such as the mountain yellow-legged frog, native to California, and the Wyoming toad are also in danger of extinction.
Factors such as habitat loss and global warming also contribute to the declining amphibian population, but the chytrid fungus is a serious problem, said Donal Boyer, the zoo's curator of herpetology.
There are about 6,000 species of amphibians in the world, and one-third of those are endangered or threatened, Boyer said. Amphibians include frogs, salamanders and caecilians, legless animals that resemble a snake or an earthworm. They are food for larger animals and keep insect populations and algae in check.
"It's a big deal if something that forms an important part of an ecosystem in terms of numbers and sheer mass start to disappear," Boyer said. "Amphibians are what's known as an indicator species. If they are disappearing from these environments, it means something is out of whack."
Sacramento Bee
Federal water forecast is grim for some Valley farms: Not a drop...Mark Grossi
Farmers on the west side of the San Joaquin Valley today will hear the news they have feared for weeks – an unprecedented forecast of no federal water for their multibillion-dollar industry.
Farmers now must shift into survival mode, pumping groundwater to keep orchards alive and leaving bare dirt where tomatoes, onions and melons grew in previous years.
"People are going to be using every available groundwater well and trying to get by," said Sarah Woolf, spokeswoman for Westlands Water District, the largest of the districts that are affected.
One Westlands farmer, Joe Rascon, will cut his cotton crop by 75 percent. "It is going to be a nightmare," he said Thursday.
Even if there is a lot of rainfall in the next several weeks, west-side farmers can expect only 10 percent of the water they want.
The lowest previous delivery was 25 percent during two drought years in the early 1990s.
The announcement today stems from complex problems, including three consecutive dry winters and reduced water pumping to protect dwindling fish in Northern California rivers. West-siders get water from northern rivers through canals belonging to the federally operated Central Valley Project.
The bad news was shared privately Thursday with legislators in Washington and some Valley water leaders.
It is the first water-delivery forecast of the season, water officials said, so a stormy late winter and spring may change the picture.
The U.S. Bureau of Reclamation, owner of the Central Valley Project, usually modifies the forecast in March and April.
Stormy weather over the past two weeks has added to the Sierra snowpack, but the 400-mile-long range is still far behind – about 75 percent of average for this date.
Valley water officials say today's forecast will not settle one troubling question: Will east-side farmers have to give up some of their San Joaquin River water for some west-side farmers, who have high priority under decades-old contracts?
If the high-priority west-siders – known as exchange contractors – cannot get their allotment of imported water from Northern California, they can legally get water from Millerton Lake, near Fresno.
That has never happened, but east-side farmers who irrigate with water from Millerton Lake would lose water in that event.
East-siders today also will hear news about their San Joaquin River forecast – 25 percent for high-priority farmers in the Friant Water Users Authority and zero for lower-priority farmers.
"We would like to see a lot of storms in the next several weeks," said Ron Jacobsma, Friant general manager. "If there is a call on Friant water from the exchange contractors, we could have very tight water supplies this year."
West-side cities, such as Coalinga and Huron, will be told to expect 50 percent of their usual allotments, officials said.
Many other west-side cities get their water from wells.
Most leaders in west-side communities knew bad news was on the way.
Mendota Mayor Robert Silva wonders how much more his farming community can take. He estimates that 80 percent of his city's economy is tied to agriculture.
The city's unemployment rate is 40 percent. Silva said he is working with social service agencies to distribute 1,000 boxes of food next month.
"But that will only be a Band-Aid," Silva said. "It will only last for a few days."
Water officials say they violated Delta flow standard to aid salmon...Matt Weiser
California water officials admitted this week they have already violated a key water flow standard in the Delta intended to protect imperiled fish.
The admission came in hearings Tuesday and Wednesday before the state Water Resources Control Board. The hearings were held to consider a petition from the state Department of Water Resources and the U.S. Bureau of Reclamation to win exemptions from the standard because of drought.
Board members and Delta advocates were surprised to learn the flow standard had already been violated while the petition was pending.
"There probably were some days where we were not meeting the outflow standards," said Jerry Johns, deputy director of the California Department of Water Resources. "At least we had the petition in before any of these things took place."
The agencies sought the exemption because they believe they need to retain cold water in the state's depleted reservoirs to ensure healthy salmon runs this fall.
But in doing so, they risked violating a minimum-outflow standard in the Sacramento-San Joaquin Delta. That standard is designed to protect other fish, including the Delta smelt and longfin smelt. It requires meeting flow targets over a certain number of days in a month, usually by releasing water from upstream dams.
The drought, in other words, posed a tough choice between fish species.
The agencies acted after consulting with wildlife officials, he said, who agreed that saving water for salmon runs was a prudent step.
Johns said they couldn't wait for the water board's lengthy review process. As a result, he said, they retained about 100,000 acre-feet of water in state and federal reservoirs.
"Technically, we did not actually meet the number of days in February that's called for by the board," Johns said. "We took what actions we thought were the best overall mix to better protect fish."
Subsequent rains created enough natural flow to avoid continued violations, though the drought is far from over.
Bill Rukeyser, spokesman for the state water board, said no penalties will be assessed if the board approves the petition. It would become a retroactive endorsement of violations that have already occurred, a fact that does not sit well with critics.
If the petition is rejected, fines or other penalties may be assessed, Rukeyser said. A decision could come next week.
Mike Jackson, an attorney for the California Sportfishing Protection Alliance, wants penalties levied to force the agencies to plan more carefully.
"The danger of suspending those rules is that they're really the only protection the ecosystem has," Jackson said.
Calif home builder files for bankruptcy protection...The Associated Press
IRVINE, Calif. -- California home builder John Laing Homes has filed for bankruptcy protection, citing a weakening demand for new homes.
WL Homes, which does business as John Laing Homes, filed Chapter 11 documents in U.S. Bankruptcy Court in Delaware on Thursday. The 161-year-old firm listed assets of more than $1 billion and debt of $500 million to $1 billion.
Company officials said the filing was due, in part, to the dwindling number of new homes sold in the U.S. over the past three years. John Laing had revenue of $948 million on the sale of 1,371 homes in 2007. Revenue dropped to $287 million on the sale of 560 homes through Nov. 30 of last year, according to court documents.
"The company's performance has been significantly affected by the downturn in the residential construction industry starting in 2006," Chief Restructuring Officer Bradley D. Sharp said in court papers. "There has been a sharp fall in both the number of new homes sold in the United States, as well as the prices of new homes sold."
The company's roots date back to 1848 when James Laing began building homes in England. John Laing Homes entered the U.S. market in 1984.
Dubai-based Emaar Properties, one of the world's largest developers, bought John Laing for more than $1 billion in 2006 during the real estate boom. Emaar last week reported a fourth-quarter loss based mostly on a $482 million write-down in goodwill at John Laing.
John Laing built about 3,000 homes, most in California, three years ago. The company also has divisions in Colorado, Arizona and Texas.
More than two dozen home builders have sought bankruptcy protection since June 2007. Among the companies are billionaire Carl Icahn's WCI Communities Inc.; Ennis Homes, a Porterville, Calif., home builder founded in 1979; and LandSource Communities Development.
Editorial: National parks for the next 100 years
Ahead of the 1966 golden anniversary of the National Park System, the National Park Service launched a 10-year project to "overcome the inroads of neglect and to restore to the American people a National Park System adequate for their needs."
Today, we're just seven years from the national parks' centennial. That occasion should be not just be a celebration of the world's first national parks system but a chance to rethink the parks for the future.
The 1916 law creating the U.S. system said the fundamental purpose was "to conserve the scenery and the natural and historic objects and the wildlife" of our nation's parks and to "leave them unimpaired for the enjoyment of future generations."
For the next century, what kind of park system do we want to have as a nation?
The National Park Conservation Association is funding an independent National Park Second Century Commission seeking public testimony on this question and will make recommendations by fall.
California has a huge stake in the outcome. This state has 23 national park units, including nine national parks: Yosemite, Sequoia & Kings Canyon, Redwood, Lassen Volcanic, Channel Island, Death Valley, Joshua Tree and San Francisco Maritime. It has a wealth of lands in the national conservation landscape system that could be future parks.
Which national monuments, national conservation areas and wilderness areas should become national parks? Should parks offer more free shuttles? With overnight park stays dropping off, should we rethink fees and the condition of facilities? Who isn't visiting parks and why?
Now is the time to weigh in about the future of these national treasures.
The National Park Second Century Commission will take public comment from 5 to 8 p.m. Tuesday at the Fort Mason Conference Center at Marina Boulevard and Buchanan Street, San Francisco. Send comments to info@visionfortheparks.org. See the Web site at: www.visionfortheparks.org
Captial Press
Septic tank rules spark opposition
State lacks minimum standard; beach pollution a concern...Cecilia Parsons...2-19-09
The state has postponed a final hearing on proposed rules regulating septic systems, and extended the comment period, in the wake of huge turnouts at public hearings across California, and after receiving a flood of comments on the plan.
The proposed rules, written by the State Water Resources Control Board, would take effect next year, giving property owners the next five years to have their tanks inspected. Property owners would also be required to test water wells for contamination.
Cost for inspections and tests vary, but the state is using $325 as an average. Included in the proposal are rules for repair and mitigation of leaks.
The board wrote the proposals in response to legislation AB885, passed in 2000.
At least one of the triggers for AB885 was chronic beach pollution from Malibu residents' septic systems. Clegern said the other prompt for the rules is to create a baseline for determining septic tank effects on state water.
California is one of only two states that lack a minimum standard for septic tanks, although many California counties set their own standards.
The legislation asks for statewide standards for siting, construction and performance.
The board has not set a date for the final hearing, which was originally to be conducted Feb. 9 in Sacramento. Comment period on the proposed rules now ends at noon on Monday, Feb. 23.
Part of the reason for the delay was cancellation of a Jan. 27 hearing in Santa Rosa.
Dave Clegern, spokesman for the State Water Resources Control Board, said due to a large crowd at the scheduled Santa Rosa hearing, two sessions were held on Feb. 9. Large crowds have been the norm at most of the 11 hearings.
According to reports from local publications covering the hearings, one of the main concerns with the rules is that they took a "one-size-fits-all" approach.
A Del Norte newspaper reported that Community Development Director Ernie Perry said the rules were written to address problems where homes sit close to sandy beaches, in contrast to the remainder of the state.
In Placer County, county supervisors approved a letter of protest to be sent to the state board on behalf of the county's 26,000 septic system owners. One state assemblyman has announced he would seek to repeal the legislation.
Clegern confirmed that as the hearings gained attention, crowds began to swell. Not all the speakers are opposing the regulations, he said.
"Some are telling us they are too lax," Clegern said.
Others have been outspoken in criticizing the proposed regulations.
At the hearing held Jan. 22 in Fresno, board chairman Tam Doduc emphasized the proposals were not set in stone and cost concerns of residents were valid.
Following the end of the comment period, Clegern said the agency would begin the process of revising the proposed rules.
Major rule proposals
• Require owners to have septic tanks inspected
• Require testing of wells for contamination.
• Set standards for septic tank siting, construction and performance.
More information
The state's proposed septic tank discharge regulations, draft environmental impact report and related information can be found online at www.waterboards.ca.gov/water_issues/programs/septic_tanks.
Stockton Record
Calaveras planners delay Trinitas decision...Dana M. Nichols
SAN ANDREAS - After hearing almost seven hours of testimony, the Calaveras County Planning Commission decided to postpone for another month any decision on the fate of the controversial Trinitas golf resort development.
Commissioners said they were deeply troubled to be asked to approve such a large and ambitious project after it is already largely built and worry that approving it could set a precedent that would undermine the county's General Plan and other land-use regulations.
"I don't know how to think about that," said Commissioner Steve Kearney, whose district includes the site of the existing golf course and the proposed clubhouse, lodge and luxury home development on 280 acres along Ospital Road near Wallace. "Right now, I couldn't make any judgment on this."
Kearney said he's also disturbed that there is now no way to truly make up for damage already done. "To me, every sand trap looks like a vernal pool that's gone."
Planning Commission Chairwoman Suzanne Kuehl said Calaveras County needs economic growth, but county rules clearly ban golf courses in agricultural preserves.
"I am stunned you would go so far and build so much without the proper zoning and entitlements," she said to Trinitas owner Mike Nemee.
The 280-acre Trinitas project includes an 18-hole golf course that was built from 2001 to 2005 without permits or environmental review, according to the county's final environmental impact report. Mike and Michelle Nemee said the course started as just a few golf holes and greens for personal use and then evolved into something larger.
"It was only supposed to be a few private holes for family and friends," Michelle Nemee said. She said she and her family had no intention to "scam the man."
During the testimony Thursday, dozens of Trinitas supporters and critics lined up to speak. Many supporters were decked out in T-shirts with slogans such as "Local Business for Trinitas" and "Neighbors for Trinitas."
Supporters said they want the jobs and economic prosperity they believe the course would bring.
Critics point out that the course's construction destroyed wildlife habitat and the resort operation conflicts with surrounding agricultural uses.
Trinitas neighbor Lynette Ospital, from the family whose pioneer ancestors gave their name to the road, voiced concerns over Trinitas' wells drawing down the water table and the effect of noise. "All this noise and everything is going to stress my livestock, it already has."
Commissioners voted 4-0 with Commissioner Bill Mason absent to continue the discussion on Trinitas until March 19.
Water use cuts may be on tap
Mandatory reduction could hit much of Stockton...Alex Breitler
STOCKTON - Now the drought hits home.
For the first time since the late 1980s and early '90s, much of Stockton may well see a mandatory 10 percent cut in water usage this summer, an official said.
The city has, until now, been somewhat shielded from the water shortages plaguing much of the state. But unless last weekend's stormy weather is repeated, Stockton could join a growing group of communities planning mandatory cuts, said Bob Granberg, deputy director of the city's Municipal Utilities Department.
Throughout the state, much hinges on the federal Bureau of Reclamation's announcement today of how much water will be delivered to farms and cities south of the Delta, including Tracy and some south San Joaquin County farms.
Some farmers are expecting no water at all.
Walnut farmer Jim McLeod, 80, describes the scene south of the Delta: "Everybody's scrambling. They're drilling all kinds of wells; they're dropping the water table. It's desperate measures for desperate people."
Our source
The Stockton East Water District, which supplies the city and area farms with water, has two primary surface sources: New Hogan Lake on the Calaveras River and New Melones Lake on the Stanislaus River.
Don't count on getting any water from the Stanislaus this year; while Stockton has a contract with the federal government, even in wet years it often doesn't get that water because of environmental needs.
A similar contract with the South San Joaquin Irrigation District is likely to be significantly slashed.
That leaves New Hogan, which already is perilously low. The plan is to draw the lake down to the lowest level at which fish can survive and recreation can continue, Stockton East's Kevin Kauffman said. That will get east San Joaquin County farmers and Stockton residents through the summer.
But if next year should be dry?
"We'll be dancing in the streets trying to make it rain," Kauffman said. "We'll be in dire straits."
New Hogan has dropped to its lowest allowable level twice: in 1977 and in 1988.
How about where I live?
Stockton does not depend only on reservoirs. It draws about 40 percent of its water from below ground, tapping a vulnerable aquifer that is shrinking and, in the east county, is dropping close to 1992 levels.
Less water from rivers means more pressure on those underground supplies. That's why mandatory restrictions may be crucial this summer, Granberg said.
If water cuts are ordered, homes and businesses would have to stay within a percentage of their base water usage. Those who go over the limit could face fines, Granberg said. To help residents, the city would offer free water conservation audits.
Municipal Utilities cuts would not apply to portions of central and southeast Stockton, which are served by the California Water Service Co. A spokesman there said that the company still is debating whether cuts will be required.
The outlook is better elsewhere in San Joaquin County:
» Lodi. The city relies entirely upon groundwater, with no mandatory cuts on the horizon, a spokesman said.
» Manteca. While deliveries from the South San Joaquin district almost certainly will be cut, the city can pump more from the ground to make up the difference.
Manteca's groundwater aquifer is stronger than Stockton's, although it contains arsenic and is not as high in quality as river water. No water rationing is expected, associate engineer Keith Conarroe said.
» Tracy. This is the only major city in San Joaquin County that gets water pumped from the Delta. That supply already has been cut back because of endangered species, not to mention the drought.
However, the Delta accounts for only one source of city water. Groundwater and reduced flows from South San Joaquin should see Tracy through 2009 without rationing, Deputy Public Works Director Steve Bayley said.
Tracy already is doing a good job conserving water in part because roughly 1,000 vacant homes have reduced demand, he said.
» To the east, the Calaveras County Water District, which has senior water rights on three rivers, plans to push conservation hard this year in part by uploading software to its Web site that will allow residents to audit their water usage, a spokesman said. But no rationing is planned.
The big picture
Water rationing was put in place in summer in the East Bay, where communities rely heavily on the limited flows of the Mokelumne River.
Officials in Los Angeles voted Tuesday to impose rationing this summer, with penalties. That's partly because the state Department of Water Resources, which provides water mostly for urban use south of the Tehachapi Mountains, has said it will be able to deliver only 15 percent of contracted water.
The natural drought is worsened by pumping restrictions to protect Delta smelt. And some of the 25 million Californians who get Delta water are boiling mad.
"Who really gives a damn if the Delta smelt goes extinct?" McLeod said.
While water exporters are quick to bemoan the regulatory restrictions, California is stuck in a natural drought, said Barry Nelson, a water advocate for the Natural Resources Defense Council in San Francisco.
Although an allocation of zero water would be unprecedented, the sprawling Westlands Water District in the west San Joaquin Valley has, in fact, rarely gotten all of the water for which it asks.
"I have some sympathy for the individual farmers," Nelson said. "They have a right to expect the federal government will tell them the truth (about) how much water they can deliver.
"But the major point right now," he said, "is the reason the water picture is so grim is because we're in the third year of a drought."
City could consider bankruptcy...David Siders
STOCKTON - The chairman of the City Council's budget and finance committee called Thursday for Stockton to at least consider filing for bankruptcy protection, the council flirting for the first time - though still nowhere near embracing - a drastic measure it once paid no mind.
The committee that same day recommended canceling city fireworks on the Fourth of July and closing the Stockton Memorial Civic Auditorium and the municipal camp at Silver Lake until the city's worsening financial crisis is resolved. The full council is likely to order the fireworks cancellation and facility closures in March, expecting a combined annual savings of $484,134.
The city's general fund deficit is expected to reach $30 million by June 2010, and further service reductions and layoffs are all but certain.
"There will be more (cuts) coming," City Manager Gordon Palmer said. "This is only the beginning. This is not the end of it."
Already this month, Palmer issued layoff notifications to 29 police officers and laid off three department heads.
On Thursday, Councilman Dale Fritchen, chairman of the council's budget and finance committee, requested that Palmer prepare a report on the impact of filing for bankruptcy protection, a measure that could stigmatize the city and damage its bond rating, but that could dissolve expensive labor contracts, allowing the city to renegotiate them.
Were Stockton to go bankrupt, it would be the nation's largest municipality to do so since Orange County in 1994. It would follow Vallejo, which filed for Chapter 9 bankruptcy protection last year, claiming it could no longer afford the increasing cost of employee contracts.
"We need to be able to make an educated and informed decision about what's best for the city, and I don't think that we can do that if we avoid all the different options that are available," Fritchen said.
He said he is "just in the information-gathering point." Vice Mayor Kathy Miller said the same.
"It's not a word I say lightly," she said.
Palmer said he would prepare such a report as Fritchen requested "quickly" and would present it to the committee.
"We're not ready to declare bankruptcy at this time, but certainly there's a possibility that might be where we end up," Palmer said.
He said he believed the city could adequately control costs to prevent that outcome.
Fritchen's addressing bankruptcy followed the committee's unanimous recommendation that the full council:
» Cancel downtown fireworks on the Fourth of July, expecting to save $140,000 annually. The event last year attracted an estimated 25,000 people downtown, and public reaction was bitter when the city in 2007 considered canceling the show, then because of its concern about the safety of crowds so near the fireworks. The cancellation was avoided when a property owner allowed the city to launch fireworks from west of Weber Point, far enough from downtown to eliminate that concern.
The Downtown Stockton Alliance's Emily Baime said her organization and the Stockton Conference and Visitors Bureau intend to host a Fourth of July celebration downtown if the city does not. It may or may not include fireworks, she said.
» Close the Stockton Memorial Civic Auditorium beginning Oct. 1. Officials said the auditorium, which hosts some 320 events annually and averages annual attendance of 370,000, has long been burdened by the energy and maintenance costs of a heating and air-conditioning system Community Services Director Pamela Sloan called "a wreck."
If approved by the council, Palmer said the facility would be closed until the economy recovers and the heating and air-conditioning system is repaired. Its closure was expected to save $226,000 annually.
» Close the municipal camp at Silver Lake. The camp, open from June to September in the high Sierra, has lodged generations of campers since the 1920s, officials said.
Ninety-seven families - half of them from Stockton - and nine groups last year used the camp, Sloan said. Its closure was expected to save $118,134 annually.
Contra Costa Times
Contra Costa likely to see water rationing...Mike Taugher
The Contra Costa Water District's 500,000 customers will likely face mandatory water rationing in the coming months and some of the biggest farms in the state will get no water at all, water officials said Friday.
The heads of state and federal water projects that deliver trillions of gallons of water each year from the Delta to East Bay cities, San Joaquin Valley farms and Southern California said major water supply cutbacks are likely as the state braces for what is shaping up almost certainly as a third dry year.
"We would expect almost all of the major communities in California to go to some form of mandatory conservation," state Department of Water Resources director Lester Snow said at a Sacramento news conference this morning.
The grim news was an early projection of water supplies this year. It included a 50 percent cut in Contra Costa's water supply and 85 percent cut for Southern California. San Joaquin Valley growers were told they will get no water at all from the Delta this year.
Those numbers could go up, but officials said it was unlikely they would go up by much. If the rest of the year sees average rain and snow, Contra Costa's water 50 percent allocation would rise to 60 percent.
"We will very likely be asking for some form of mandatory rationing," said Contra Costa Water District assistant general manager Greg Gartrell, who said a board decision on rationing could be made in April.
The Concord-based district, which serves 500,000 in east and central parts of the county, will buy water from farmers and draw on Los Vaqueros Reservoir. Still, a draft rationing plan calls on customers to meet conservation goals and imposes monetary penalties for those who don't meet them.
Customers who use more water will be asked to cut their use by a greater percentage than those using less.
But the bigger pain will come in the San Joaquin Valley, where farmers were warned they could get no Delta water at all and if the rest of the year sees average rain and snow, they will get see 10 percent of their contractual amounts.
"We're done. D-O-N-E," said Shawn Coburn, who farms 1,500 acres in western Fresno County that will get no water from the Delta this year.
"Last year, I took every man in my west side operation who doesn't have a family and let him go," Coburn said,
Speaking at a Sacramento news conference, Snow and the top federal water officials in the region said new environmental restrictions will make it harder to recover if California enters a wet period, but said that so far the restrictions have had little affect on water supplies.
"This is not a regulatory problem. This is a hydrology problem," said U.S. Bureau of Reclamation regional director Donald Glaser.
Water officials said even a lineup of big storms would probably not translate into big increases in water supply because of the need to refill depleted reservoirs and to meet new restrictions on pumping.
Los Angeles Times
A dumb diesel deal
A backroom deal to restrict emissions for off-road diesel vehicles, such as construction equipment, was put off two years. For pollution and health reasons, the Legislature should pass a bill to get t...Editorial
The Republican lawmakers who held up the state budget for months showed a profound disregard for democracy, the government's fiscal health and the environment -- but for those who have followed the state party's antics over the years, that's hardly surprising. What really boggles the mind is that one of their key backroom deals came at the expense of their own constituents and big-business allies.
Regulators spent two years holding public hearings and conducting studies before adopting rules in 2007 restricting emissions from off-road diesel vehicles, particularly heavy construction equipment. The state Air Resources Board estimated that the rules, which go into effect starting next year, would avert 4,000 premature deaths by 2030 and save up to $26 billion in healthcare costs. Yet without a hearing or debate, GOP lawmakers attached a "trailer bill" to the budget that delays key retrofitting requirements, reducing by 17% the emissions savings the rules would have produced by 2014.
It isn't just that this thwarts the democratic process, runs counter to the public interest and contradicts the priorities of the governor and the majority of the Legislature. Nor is it just that people may suffer and die of asthma and cardiovascular disease as a result -- especially in the polluted Central Valley, where many GOP districts are headquartered. It's that it won't even ultimately benefit the construction industry, or any other.
California is required to meet federal Clean Air Act standards, and the off-road diesel rules were part of a comprehensive plan to bring the state into compliance by a 2014 deadline. Regulators will now have to find other ways of attaining the same pollution cuts, but air board chief Mary D. Nichols says there aren't any good options. There are two possible outcomes: Regulators will have to mandate cuts by other industries that would be far more economically damaging than the off-road diesel rules, or the state will be out of compliance in 2014 and face federal sanctions, including a cutoff of funding for transportation projects. Who will suffer if that happens? The construction industry.
It may not be too late to undo the damage. The Legislature could pass a bill, by majority vote, reinstating the former deadlines. That should be a top priority.
Google Earth maps carbon dioxide emissions...Catherine Ho...Greenspace
Scientists have developed an interactive map on Google Earth that shows fossil-fuel carbon dioxide emissions across the United States.
Users can view pollution levels from factories, power plants and residential and commercial areas in their state or county. They can also compare emission levels in their county with those of other counties in the U.S. The mapping system, called the Vulcan project, is based on 2002 data.
California, which has the second-highest level of carbon dioxide emissions in the United States, emits 100 million tons of carbon every year, said Kevin Gurney, an assistant professor of earth and atmospheric sciences at Purdue University. Gurney led the team of scientists who developed the project.
California is on track to increase its emissions by 30% over 1990 levels by 2020. Fossil-fuel emissions accelerate global warming and contribute to climate change, which could mean droughts, heat waves and increased wildfires.
The Vulcan project was a collaboration among researchers from Purdue, Colorado State University and Lawrence Berkeley National Laboratory. It was funded by NASA and the U.S. Department of Energy.
San Diego Union-Tribune
Did rains wash drought away?
Storms help, but 'conserve' still watchword...Robert Krier
When will the drought be declared over?
Don't expect a proclamation from the state's water managers anytime soon.
Storm after beneficial storm has soaked California for the past two weeks. And early next week, another big snow producer is predicted to smack the Sierra – the key region for storing the state's water supply as snow.
But even if the next storm meets expectations, drought will still be the buzzword.
“Each year, we usually get five big storms. . . . This year, we've had about one and a half,” said Elissa Lynn, senior meteorologist for the California Department of Water Resources.
The picture for San Diego County isn't much brighter, despite its above-normal rainfall this winter. The region's water officials continue to pitch conservation.
Rationing is probably unavoidable, said Ken Weinberg, director of water resources for the San Diego County Water Authority.
“The weather would really have to turn sharply, and we don't see it,” Weinberg said. “We expect rationing to happen by the summer. The question now is, how much?”
The winter storms' timing hasn't helped raise local reservoir levels, which averaged almost 51 percent of capacity yesterday.
Little runoff has reached the reservoirs this month because of a long, dry stretch between rainy periods in late December and February, said Don Thomson, director of water quality for the Sweetwater Authority. Runoff into the agency's reservoirs, Loveland and Sweetwater, has been about normal for this time of year, Thomson added.
Most of the water from the first couple of storms this month soaked into the ground.
“It takes a lot of water continuously to fill the reservoirs,” Thomson said. “If it's spotty, it doesn't help us much.”
The local reservoirs satisfy only a small part of the county's water needs. In a typical year, they fulfill 10 percent to 15 percent of the region's demand. Most of the county's water supply comes from Northern California and the Colorado River basin.
California's drought isn't tied entirely to what falls from the sky this year.
In 2008, the river runoff in Northern California was 57 percent of normal, and it was 53 percent the year before. That caused the state's reservoir levels to plummet.
Those two dry years, plus court-ordered water-transfer restrictions to protect endangered fish, prompted Gov. Arnold Schwarzenegger's drought proclamation last June.
Storms this month haven't been productive enough to compensate for the overall deficit. At the beginning of February, state water managers calculated the annual runoff would again be 57 percent of normal. The projection assumed average precipitation for the rest of the winter and spring.
The northern end of California is starting to catch up to normal precipitation levels.
Yesterday, the amount of water in the state's snowpack, called the snow-water equivalent, stood at 74 percent of normal. Even a return to 100 percent won't be enough to end the drought, because the two previous years were extremely dry, meteorologist Lynn said.
The storm anticipated for early next week could dump several feet of snow on the mountains of Northern California, and that would lift the February snowfall total above normal.
But, Lynn said, the runoff level would probably be only a few percentage points above the Feb. 1 projection.
Determining when the drought has officially ended will involve checks of reservoir levels and estimates of runoff.
There is no set formula, Lynn said. The situation has changed since the last statewide drought in the 1990s, because of population growth and changes in water-use patterns.
“It's still subjective,” Lynn said.
Weinberg, the county water authority official, said restoring Southern California's water supply will take more than a succession of wet winters.
Pumping issues in the Sacramento/San Joaquin Delta are years from being resolved, and that will limit how much water the state's southern half can import, he said.
His agency continues to tell people to turn off irrigation systems during wet periods, Weinberg said, and it will ramp up its conservation campaign in the spring.
“We just can't continue to use water the way we have,” he said.
New York Times
Crop Scientists Say Biotechnology Seed Companies Are Thwarting Research...ANDREW POLLACK
Biotechnology companies are keeping university scientists from fully researching the effectiveness and environmental impact of the industry’s genetically modified crops, according to an unusual complaint issued by a group of those scientists.
“No truly independent research can be legally conducted on many critical questions,” the scientists wrote in a statement submitted to the Environmental Protection Agency. The E.P.A. is seeking public comments for scientific meetings it will hold next week on biotech crops.
The statement will probably give support to critics of biotech crops, like environmental groups, who have long complained that the crops have not been studied thoroughly enough and could have unintended health and environmental consequences.
The researchers, 26 corn-insect specialists, withheld their names because they feared being cut off from research by the companies. But several of them agreed in interviews to have their names used.
The problem, the scientists say, is that farmers and other buyers of genetically engineered seeds have to sign an agreement meant to ensure that growers honor company patent rights and environmental regulations. But the agreements also prohibit growing the crops for research purposes.
So while university scientists can freely buy pesticides or conventional seeds for their research, they cannot do that with genetically engineered seeds. Instead, they must seek permission from the seed companies. And sometimes that permission is denied or the company insists on reviewing any findings before they can be published, they say.
Such agreements have long been a problem, the scientists said, but they are going public now because frustration has been building.
“If a company can control the research that appears in the public domain, they can reduce the potential negatives that can come out of any research,” said Ken Ostlie, an entomologist at the University of Minnesota, who was one of the scientists who had signed the statement.
What is striking is that the scientists issuing the protest, who are mainly from land-grant universities with big agricultural programs, say they are not opposed to the technology. Rather, they say, the industry’s chokehold on research means that they cannot supply some information to farmers about how best to grow the crops. And, they say, the data being provided to government regulators is being “unduly limited.”
The companies “have the potential to launder the data, the information that is submitted to E.P.A.,” said Elson J. Shields, a professor of entomology at Cornell.
William S. Niebur, the vice president in charge of crop research for DuPont, which owns the big seed company Pioneer Hi-Bred, defended his company’s policies. He said that because genetically engineered crops were regulated by the government, companies must carefully police how they are grown.
“We have to protect our relationship with governmental agencies by having very strict control measures on that technology,” he said.
But he added that he would welcome a chance to talk to the scientists about their concerns.
Monsanto and Syngenta, two other biotech seed companies, said Thursday that they supported university research. But as did Pioneer, they said their contracts with seed buyers were meant to protect their intellectual property and meet their regulatory obligations.
But an E.P.A. spokesman, Dale Kemery, said Thursday that the government required only management of the crops’ insect resistance and that any other contractual restrictions were put in place by the companies.
The growers’ agreement from Syngenta not only prohibits research in general but specifically says a seed buyer cannot compare Syngenta’s product with any rival crop.
Dr. Ostlie, at the University of Minnesota, said he had permission from three companies in 2007 to compare how well their insect-resistant corn varieties fared against the rootworms found in his state. But in 2008, Syngenta, one of the three companies, withdrew its permission and the study had to stop.
“The company just decided it was not in its best interest to let it continue,” Dr. Ostlie said.
Mark A. Boetel, associate professor of entomology at North Dakota State University, said that before genetically engineered sugar beet seeds were sold to farmers for the first time last year, he wanted to test how the crop would react to an insecticide treatment. But the university could not come to an agreement with the companies responsible, Monsanto and Syngenta, over publishing and intellectual property rights.
Chris DiFonzo, an entomologist at Michigan State University, said that when she conducted surveys of insects, she avoided fields with transgenic crops because her presence would put the farmer in violation of the grower’s agreement.
An E.P.A. scientific advisory panel plans to hold two meetings next week. One will consider a request from Pioneer Hi-Bred for a new method that would reduce how much of a farmer’s field must be set aside as a refuge aimed at preventing insects from becoming resistant to its insect-resistant corn.
The other meeting will look more broadly at insect-resistant biotech crops.
Christian Krupke, an assistant professor at Purdue, said that because outside scientists could not study Pioneer’s strategy, “I don’t think the potential drawbacks have been critically evaluated by as many people as they should have been.”
Dr. Krupke is chairman of the committee that drafted the statement, but he would not say whether he had signed it.
Dr. Niebur of Pioneer said the company had collaborated in preparing its data with universities in Illinois, Iowa and Nebraska, the states most affected by the particular pest.
Dr. Shields of Cornell said financing for agricultural research had gradually shifted from the public sector to the private sector. That makes many scientists at universities dependent on financing or technical cooperation from the big seed companies.
“People are afraid of being blacklisted,” he said. “If your sole job is to work on corn insects and you need the latest corn varieties and the companies decide not to give it to you, you can’t do your job.”
CNN Money
Get ready for a wave of bank failures
In less than two months, regulators have seized 13 banks. Experts think many more banks will collapse before the financial crisis is over...David Ellis
NEW YORK (CNNMoney.com) -- If it's Friday, there must be a bank failing somewhere across the country.
For five consecutive weeks, industry regulators have seized control of a bank after the market closed on Friday, bringing the total number of failed banks so far this year to 13.
To put that into perspective, 25 banks failed in 2008, suggesting that the rate of failures is quickening as the economic crisis deepens.
"We'll have a banner year [of failures] this year," said Stuart Greenbaum, retired dean and professor emeritus at the Olin Business School at Washington University in St. Louis.
At the current rate, nearly 100 institutions-- with a combined $50 billion in assets -- will collapse by year's end.
But with more consumers and businesses likely to default on loans as the recession drags on, some industry observers think the pace of bank failures could accelerate further.
Gerard Cassidy, managing director of bank equity research at RBC Capital Markets, upped his expectations for bank failures earlier this month, warning that he anticipates 1000 institutions could fail over the next three to five years.
"The sooner the bank regulators can shut down the troubled banks, the faster the industry will get back on its feet, in our view," he wrote.
A different era
Still, the current crop of bank failures hardly comes close to what happened during the savings & loan crisis two decades ago.
More than 1,900 financial institutions went under during 1987-1991, peaking with the failure of 534 banks in 1989.
And many experts are quick to draw distinctions between the two eras.
During the last crisis, many savings and loans were coping with an inability to adapt to higher interest rates, while many banks were significantly undercapitalized to deal with losses.
"That is not our problem here," noted Ann Graham, a professor of law at Texas Tech who spent part of her career as a litigator for the FDIC and Texas' Department of Banking during the 1980s.
Instead, she said the main problem now is that banks have been stuck with assets in their loan and investment portfolios that have quickly soured.
It's also worth remembering that when banks fail, they don't close down for good. The Federal Deposit Insurance Corp. guarantees deposits up to $250,000 in single accounts. Also, the FDIC often is able to find a willing buyer for the failed bank immediately, which means little, if any, disruption for the failed bank's customers.
Still, regulators face a crisis of significantly larger proportions today that promises to keep the nation's banking industry strained for some time.
Even though the overwhelming majority of the banks that have gone under since the beginning of 2008 are smaller community banks, there have been two notable big bank failures.
Last year, the California-based mortgage lender IndyMac failed. That was followed by the collapse of savings and loan Washington Mutual, the largest bank failure in history. The FDIC seized WaMu and immediately sold its banking operations to JPMorgan Chase (JPM, Fortune 500).
Several experts fear the potential for another large bank failure. While the U.S. government has repeatedly said it will not allow major institutions to fail, namely Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500), some embattled regional banking giants may be too far gone to save.
"Conceivably, we'll see some larger names fail as we go forward," said Frank Barkocy, director of research with Mendon Capital Advisors, a money management firm that invests primarily in financial stocks.
Bracing for tough times
Regulators have indicated they are gearing up for tougher times. In addition to requesting an increase in its borrowing authority from the Treasury, the FDIC has maintained that it expects its deposit insurance fund to suffer $40 billion in losses through 2013. Last summer's collapse of IndyMac wiped out $8.9 billion from the fund.
Fearful of drawing down the fund any further, banking authorities may attempt to broker more assisted acquisitions like JPMorgan Chase's purchase of Washington Mutual, where the purchaser acquires the deposits and a portion of the failed bank's bad assets.
"The [FDIC's] incentive is not to have a bank failure at all," said Jack Murphy, a long-time partner at the law firm Cleary Gottlieb Steen & Hamilton, who previously served as general counsel for the agency. "If it is possible to have a private market solution, that is ideal."
Next week, regulators are expected to provide a better glimpse of the health of the banking sector, when the FDIC presents its quarterly banking profile for the fourth quarter of 2008.
One highlight of the report will be the agency's so-called "problem bank" list. That number is expected to climb from 171, where it stood at the end of the third quarter.
Some have charged that the list is hardly reliable, given that only a fraction of the banks that are included ever actually reach the point of collapse.
Nevertheless, a big jump in the number of banks on the problem list could serve as an indicator that there will many more Friday failures to come this year.
Where the banks are failing
Bank failures - many caused by foreclosures - keep mounting...FDIC...Interactive Map 
California bank failures...8
Who won't be helped by housing fix
The jobless and many of those who owe far more than home is worth won't benefit much from Obama's foreclosure prevention plan…Tami Luhby
NEW YORK (CNNMoney.com) -- Don't have a job?
Struggling to keep up with payments on a home worth less than half the mortgage?
Owe way more than your home's value, but can still afford the payments?
Sorry, but you likely aren't among the 9 million people who may get help under President Obama's $75 billion foreclosure prevention program.
The program, unveiled Wednesday, is being hailed as the most comprehensive fix for the foreclosure crisis plaguing the nation. The president says it helps both responsible homeowners suffering from falling home prices and borrowers either at risk of or already in default.
But not everyone will benefit. The program does virtually nothing for the unemployed, who often don't have enough income to make any reasonable monthly payment affordable. And, since it relies more heavily on lowering interest rates than on reducing principal, it does little for borrowers concerned their homes will never recoup their value.
Take Joe Martinez of Bristow, Va., who fits the profile of the "responsible" homeowner Obama cited in the plan. The government contractor and his wife thought they did everything right when they bought their brand new $600,000 house two years ago. They put 5% down and got a 30-year fixed-rate mortgage they could afford.
Others in their neighborhood, however, couldn't keep up with the payments. As foreclosure rose, the value of the couple's home plummeted to $450,000, leaving them doubtful they'd ever recover their investment.
Martinez called their lender to try to get into the Hope for Homeowners program, which would reduce their loan balance to 90% of the home's current value. But they were turned down because they weren't in default.
So two months ago, the couple stopped paying their mortgage, hoping they could then qualify. But even if they don't, they are willing to take the hit on their credit scores to stop throwing money down the drain.
"There's just no point to stay here," said Martinez, 29, adding he could rent the house across the street for half his monthly mortgage payment. "We don't want to give up our home, but it's never going to come back."
Foreclosures will continue
The administration's program isn't designed to help every homeowner, experts said. Nor should it.
"It's a mistake to think we can stop all foreclosures," said Edward Morrison, a professor at Columbia Law School. "Only about one-third of existing foreclosures can be stopped."
The plan calls for loan servicers to modify mortgages for those at risk of or already in default so that the monthly payment is no more than 31% of the borrower's income. This will be done primarily through interest rate reductions, which are more palatable to most servicers than principal write-downs. The federal government will subsidize the interest rate reductions, as well as provide a multitude of incentives for servicers, mortgage investors and borrowers.
Also, borrowers with little or no equity in their homes who are on time with their payments could be eligible to refinance to take advantage of the current low interest rates, which hover around 5%. The plan lifts the guideline that borrowers must have at least 20% equity to refinance, allowing those with loans as large as 105% of their home's value to qualify. This is designed to help people who have seen their equity eaten away by falling home prices.
No job? Out of luck
A growing number of people are falling behind in their payments because they've lost their jobs, ensuring the tidal wave of foreclosures will continue as long as unemployment keeps rising.
It's very tough, however, to help people who lose their income, experts said. Reducing monthly payments can only go so far since the loan's value after modification has to be worth more than it would be if the home were put into foreclosure. Those who lose their jobs often can't make payments large enough to overcome this hurdle.
For these people, the solution often is a short sale, in which the lender agrees to take forgive the loan balance above the home's sale price, experts said.
"In some cases, the homeowners can't stay in the home," said Marietta Rodriguez, director of the National Homeownership Program for NeighborWorks America.
The best way to help the unemployed facing foreclosure is to get them jobs, experts said. The Obama administration is addressing that in the $787 billion economic stimulus package the president signed into law on Tuesday. It is expected to create or save up to 3.5 million jobs.
Underwater borrowers
Many underwater borrowers -- those who owe more than their home is worth -- may find the plan falls short. Some estimates say up to 12 million homeowners may be underwater, with 4 million of them behind on their payments.
The danger is that some of these borrowers may decide it's just not worth it to continue paying if the home isn't likely to recoup its value. This is especially true of those finding it hard to make their payments.
Some struggling borrowers will qualify for lower monthly payments, but they will likely continue to be underwater. The government is offering to reduce their principal by $1,000 a year for five years, but that sum won't do much to bring them back into balance in most cases.
The only way to effectively help those with negative equity in their home is to forgive part of the loan balance, some experts say. They are disappointed that this measure is not given more emphasis in the program.
"Cutting principal is really what's needed to contain foreclosures," said Christian Menegatti, lead analyst for economic research firm RGE Monitor.
Other borrowers, however, are too far gone to get a modification.
"If you're so far underwater, more than about 150 percent loan-to-value, we think you're very unlikely to succeed -- those will not be eligible, as well," Housing Secretary Shaun Donovan said Wednesday.
As for those who can afford their payments, the program contains little to address their housing problems. Only those with loans worth 105% or less of their home's value can partake in the refinancing offer.
Martinez isn't interested in having his interest rate lowered. He would like to see some of his principal forgiven.
"Why would it be such a big deal for them to modify my loan?" he said, noting that his tax dollars are being used to finance the program. "Wouldn't that stabilize the economy?"
Some experts, however, say Martinez is the exception. Those who can make their payments aren't likely to walk away because still need a roof over their head, said Howard Glaser, a mortgage industry consultant.
"Homeowners aren't day traders in their homes," he said. "The investment value is not an issue."