Skip to comments.Falling home values mean budget crunches for cities
Posted on 12/26/2011 6:49:41 PM PST by DeaconBenjamin
The bust that began in 2007 has just begun to ravage tax revenues in communities from coast to coast. The problem is unlikely to subside soon.
For instance, Baltimore collected $815 million in property taxes during the most recent fiscal year. Next year, the figure is predicted to shrink to $803.5 million. The following year, $773 million. The year after that, $735.7 million. The year after that, $729.4 million.
I dont see any quick fixes over the next four or five years, to be honest. Baltimore already faces a budget deficit of more than $50 million next year. Obviously, it means we have much lower revenues than we had in past. Its creating gaps in our budget.
Communities generally see a lag before property taxes reflect the true value of a home. Thats good news for homeowners during boom times, when their tax bills dont immediately reflect skyrocketing values. Its not so great during the bust of recent years, when many homeowners protest that their taxes havent fallen as rapidly as their property values. But in many places, the assessments have fallen.
Many local governments weathered the early years of the financial crisis in part because the property tax revenues they rely upon so heavily held steady or actually increased as a result of assessments that reflected inflated prices. Municipalities must now recognize the collapse in home prices and the shrinking tax base that comes with it. At the same time, state and federal aid dries up.
Local governments have lost more than half a million employees since the financial crisis hit in September 2008. Through November, local governments had shed an average of 9,300 jobs each month this year, offsetting some of the job growth generated by the private sector.
(Excerpt) Read more at washingtonpost.com ...
Let the bastard politicians starve.
In that case, better raise taxes. /s
Drop in home values have nothing to do with budget shortfalls. How stupid is this reporter
That’s exactly what they do.
When the assessment goes down the tax rate goes up.
They will adjust it until they get what they need.
Austerity: the immovable object.
Entitlement mentality: the irresistible force.
Epic clash coming in 5 ... 4 ... 3 ...
Many Pennsylvania Counties (assessments are done by County government) have voted to delay countywide reassessment indefinitely.
There is nothing to gain by spending money to determine that the real estate tax base has contracted.
Exactly, like I said this journalist is ignorant or stupid.
vacant foreclosed homes return no taxes, and there are record #’s in foreclosure today
Falling property values means nothing to the taxing authorities where I live. They just keep jacking the rates up to offset the value base it’s calculated on. They don’t give a rip.
Millages and property tax index off of real estate values, and abandoned homes are a drag on municipal revenues. Lower real estate values cause less income.
An abandoned home still has water lines and power lines running across the property in easements, and those line still have to be maintained even when there is no tax paying occupant.
We are ten years over built and this will not ease any time soon.
Did you never bother to read the housing bubble threads in years gone by? Where this was going to go was accurately explained, and now we are there.
Move someplace where they are hamstrung in their power to raise rates.
I dont see any quick fixes over the next four or five years, to be honest......Reduce spending. Took me all of 5 seconds to realize that. They can figure how to reduce spending; they just DON”T want to.
My County Assessor has doubled tax rates each of the past 3 years and is on record stating he will continue to do such until the County is solvent.
Not sure you are right. The foreclosured home still exists, and the property tax bill exists. Maybe the bank pays it, I don’t know, but I would bet somebody does.
Buy your own county.
Instead of investing their new found wealth in a rainy day fund, they spent money on inflated Pensions and Salaries to the Public Employees who are primarily funded from Property Tax Revenue, Fire, Police and Teachers.
Then the dam burst and they realized they forgot to buy Life-jackets.
My city is following your advice. In 2004 it instituted a city income tax. This year it doubled the income subject to it (while claiming they weren't "raising our taxes").
All the while the local liberal rag ran piece after piece demanding those of us still hanging onto our jobs "pay our fair share". Every time I hear some dimwit say that I want to make a non verbal response resulting in painful outcome for the speaker.
Our city and county just raised property tax rates to offset declining home values.
I’m pretty sure the rates won’t go down when property values rise.
Except for the fact that it crushes homeowners and drives them from the state.
In that case, better raise taxes. /s
They are doing just that! Taxable values going up. Cash value going down. 5 years ago my parents house was worth 300K.. Now.. mid-upper 100’s.. Taxable value. 345K!!!
They do live in the peoples republic of Minneapolis.
vacant foreclosed homes return no taxes, and there are record #s in foreclosure today
Yes they do. Someone still has to pay them (the bank holding the bad paper) or the taxing authority ends up owning them.
“The foreclosured home still exists, and the property tax bill exists. Maybe the bank pays it, I dont know, but I would bet somebody does.”
The municipality seizes the property because of the tax lien, then ends up having to maintain or demolish it when there are no buyers. Many “crackhouses” are in fact owned by their municipalities - and they devour rather than generate tax revenue.
The foreclosing bank has to pay the taxes.
But do they? Is this enforced?
Yes, unless they simply charge off the debt, release their lien and walk away - which is happening more and more.
If the taxes aren’t paid, a tax lien is put on it...and after a period of time it is sold off by the county, for at least the amount of the tax lien. For this reason, most banks will pay taxes. However, the process takes around two years...so a bank or insolvent developer can essentially borrow money at very low interest by delaying tax payments. When I look at the past due tax rolls, I see that many started this game in 2009...so here in 2011 they will pay the ‘09 tax, but not ‘10, and the actual ‘11 taxes won’t get paid until ‘13. I look at the late tax rolls as what should be the first predictor that real estate is getting better. So far, however, the late rolls just are getting longer, and commercial property is really starting to show up.
Some cities are adding backdoor taxes by increasing ‘franchise fees’, which are charged to non-municipal utilities, for use of the ROW. One hundred percent of this fee is passed along to the consumer.
Good. Starve the beast. Local governments are at least as socialist and corrupt as federal.
And if local governments can’t get their money, ultimately they will get it from Uncle Sugar.
Another trick tax is PILOT, payment in lieu of taxes. Essentially if the city owns a parking garage, income generated from the garage is used to make a payment to the general fund, as if property taxes were being paid on the garage. That is a good thing - keeps the city garage from having an unfair advantage over private garages. However, this concept is now being applied to city functions which have no private competition - water treatment and supply, as well as sewer collection and treatment. This raises your sewer and water bill...but your mil levy didn’t go up :)
Wait until they tell the tens of hundreds of thousands of county and city government retirees, they have to cut their lottery style retirement pensions in half...
The screams will be heard coast to coast.
Not in Kentucky. The state mandates 12% annual interest, accruing at 1% per month. If you can buy the tax bill on a property with a clean title, and can afford to wait, it's a great return.
Wow. Reminds of something a co-worker once told me: “There is no such thing as private property in this country...and if you don’t believe me, try not paying your taxes.”
Rinse and repeat.
And don’t expect the assessment rates to go down when (if) property values rebound.
Why were they jacking up the tax rates during a boom? Shouldn’t they lower the tax rates during a bust?
“Many Pennsylvania Counties (assessments are done by County government) have voted to delay countywide reassessment indefinitely.”
In my neck of the woods in NJ they had revaluations a few years ago, not so much to increase taxes as to root out the illegal apartments where all of our “guest workers” were living. They didn’t even want to remove the illegal apartments; they wanted the American property owners to pay pay taxes as 2- or 3-family homes rather than the 1-family units they were built and taxed as. Nobody cared until the children of the “guest workers” (remember that name for them, when we pretended they were temporary?) showed up in the public schools. Towns that are officially 80% “white” have student bodies that are 50% Hispanic.
Exactly, the old double dip.
These people in Congress who want to sock it to us on tax’s forget that States and County are already hosing us down.
They lower our tax’s by cutting payments to states, States cut tax’s by cutting the portion they return to County and County has to nail us to the cross.All the time taking highway funds and adding them to the General Fund and crying they cant fix the roads.
We are at the bottom of the tax food chain, and getting the shaft.