By Devin Dunlevy
City on a Hill Press Reporter

In the first weeks of 2009, Santa Cruz is feeling the grip of the global recession.

As residents and city leaders tighten their belts, last year’s housing crisis continues to reverberate throughout the community.

According to the most recent issue of the Santa Cruz Record, a weekly legal and business newspaper, there were 146 foreclosures in 2006, 506 in 2007 and 1,351 in 2008.

Furthermore, for the 2008 fiscal year, as many as 1 in 10 county homeowners did not pay property taxes by the January deadline.

The delinquencies could be tied to the nationwide mortgage crisis, said Liese Varenkamp, editor of Santa Cruz Record.

“People are struggling financially — they can’t pay their taxes,” Varenkamp said. “If you’re going to lose your home to foreclosure, why pay taxes?”

The vanishing tax revenue is endangering the Santa Cruz public library system, which is funded almost entirely through sales and property tax. The library system has spiraled into a $625,000 deficit.

Library directors were forced to close all branches on Fridays after a Jan. 12 board vote.

“It’s sad,” said Susan Elgin, acting library director. “We know that libraries get used even more during hard times. We think it’s important to be open as much as possible — we want to be there for people.”

Libraries aren’t the only public sector to be affected by falling property values and the failure of residents to pay taxes. Local businesses are also receiving a blow.

“In Santa Cruz, the declining housing market has been a problem for small businesses,” said Robert Fairlie, UCSC professor of economics. “A lot of people in Santa Cruz invest in high-tech firms. If I had stock options with high-tech firms, and they lost value, that’s less money I can invest in my small business.”

But amid all the turmoil, a 2008 Community Assessment Report by United Way suggests that Santa Cruz is faring well compared to other cities.

“There are long-term and short-term decisions to make,” City Council member Ryan Coonerty said. “In the short term, every city is in crisis. In the long run, Santa Cruz is at the forefront of most communities in the world.”

The report found that even as incomes in Santa Cruz decrease, they are 15 percent higher than the state average income and 23 percent above the national average. These data suggest that a strong social safety net and recession-resistant industries like higher education leave Santa Cruz County better off than the rest of the state and nation.

Although Santa Cruz County has not been affected as severely as inland regions, the increase in foreclosures, budget cuts and taxpayer delinquency point to rough times ahead in the new year.

“We’re facing the worst economic situation in over 60 years,” Coonerty said. “We have to respond right away.”