EDITORIAL: Reading economic tea leaves

The city of Laguna Beach is facing a mountain of bills from the Bluebird Canyon landslide, the cost of which is now running at $35 million, with the final total not yet tallied.

FEMA is expected to pick up most of the tab, but the city will be left with at least $2 million — and possibly as much as $9 million — to pay for out of its own pocket.

As we know only too well, emergencies happen at the worst times. Last month’s sewer leak was another expensive proposition, and the City Council approved an allotment of $400,000 a couple of weeks ago to pay for this relatively minor disaster.

If this isn’t enough, the city, like most others in the state and the country, is facing unexpected shortfalls from the slowing economy; sales taxes have plummeted and the city’s major revenue source, property taxes, are still rising, but not as much as in past years.

If it’s any consolation, building permits seem to have bounced back last month from a poor showing in March, when they fell by 35% from March 2007. April’s numbers are actually up over last year’s figures by 22%. Whether that portends a strengthened economy and a willingness by homeowners to resume spending on remodeling and property improvements won’t be known for months, but it’s a good sign.

Fortunately, the special half-cent sales tax approved by city voters following the landslide has been raising about $2 million a year specifically earmarked to offset landslide costs.

It will be interesting to see how the U.S. dollar’s slide in value compared to other currencies translates this summer regarding tourism. We could see an influx of foreign tourists — who are known to flock to Laguna anyway — and fewer day-trippers, especially if gasoline prices continue to escalate.

While rising gas prices are a depressing thought, this could be good for the local economy, since people who drive in to spend the day at the beach tend to bring their own refreshments and leave garbage behind.

With more foreign travelers staying at the city’s hotels and eating and shopping in town with dollars that buy more than ever, the summer season might be a big win for local businesses, and that would translate into more of those special sales tax receipts to help pay for the landslide.