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By Tom Marshall
“San Clemente Broke; May Fire All City Employees”—that was the headline on the front page of the Santa Ana Register on Oct. 19, 1935. It was the height of the Great Depression, and cities large and small were struggling to stay afloat.
As we all struggle through the current fallout from the coronavirus pandemic, it is worth taking a look at information recently uncovered by San Clemente Historical Society researcher Larry Culbertson.
In the early 1930s, San Clemente was still a fledgling beach town relying mostly on tourists and vacationers. As the Depression worsened, an estimated 25% of the area’s population became unemployed.
Among the first items cut from people’s budgets were vacations and entertainment, including expenses related to a second or beach home. So many people quit paying their local property taxes, leaving the city on the verge of bankruptcy.
Even Bank of America owed the city more than $125,000, or six years of back taxes. The bank had already foreclosed on numerous local properties, including the home of city founder Ole Hanson, as people could no longer afford their mortgages, as well as the taxes.
The city tried to help local residents by issuing a moratorium on paying delinquent taxes, but that only made matters worse for city government finances.
With the loss of property-tax revenue, the city had depended largely on traffic fines for income. Some two million vehicles a year passed through town, apparently many of them not bothering to slow down much. Even that revenue stream dried up, as people began to travel less.
The financial crisis came to a head during a city council meeting the night of Oct. 18, 1935. Faced with roughly $22,100 in unpaid bills, exhausted credit, and virtually no income, the city council proposed the elimination of almost all municipal functions except the water and fire departments.
This would have meant discontinuing street lighting, the golf course, street and pier maintenance and laying off all but a couple city employees. Bank of America offered some hope by agreeing to pay $2,500 of its due tax bill immediately, but that wouldn’t have covered the city’s cash shortfall.
In a last-ditch effort, the council voted to hold a special meeting a week later. If no remedy was found, as Mayor A.T. Smith put it, “The council will pass a resolution calling for the cessation of all municipal activities.” The city of San Clemente would cease to exist.
At that meeting, Bank of America announced that it now had a plan to pay all of its taxes in full. It was not revealed what had changed to enable the bank to do that.
As Mayor Smith announced, “The city is saved for bigger and better things.” That included a communitywide celebration with a dance and rodeo. Thousands reportedly attended, with proceeds going to purchase Christmas gifts for all local children.
Perhaps the lesson for today is life will get better if we just keep trying.
Tom Marshall is a member of the San Clemente Historical Society and a retired journalist.