Home value drop hurting cities

[Bozita]

Source: Detroit News

Monday, May 26, 2008
Home value drop hurting cities
First statewide slump since 1960s means local governments won't see usual revenue increases.
Mark Hornbeck / Detroit News Lansing Bureau

Property values dropped statewide this year for the first time in nearly five decades, signaling that Michigan could be on the verge of its next fiscal crisis: the decimation of local government budgets.

As a result of the depressed housing market, assessed values dipped 1.3 percent across the state this spring, dragged down by a 3.9 percent fall in Wayne, Oakland and Macomb counties, according to the State Tax Commission.

That means local governments that have been accustomed to annual increases of 5 percent to 6 percent in the revenue raised by property taxes will see no increase this year.

"This will be the biggest financial challenge in Michigan history," said Mark Vanderpool, city manager of Sterling Heights. "The state is going to have to work with cities to solve this problem. Some will have to drastically cut services and quality of life will quickly erode." Vanderpool predicted votes on millage increases across the state and "service cuts in the big three departments: police, fire and public works."

Read more: http://www.detnews.com/apps/pbcs.dll/article?AID=/20080526/METRO/805260340/&imw=Y

---

Michigan's not alone on this one, folks.

[grilled onions]

1. But There Is A Way To Boost That Revenue

In areas that are very populated they raise the value of the land(when the value of the homes decrease). Taxes go up. They win We lose.

[Baby Snooks]

9. That is pretty much happening all around the country...

Most of the larger cities knew what might happen down the road and so they began this little "sleight of hand" believing that by increasing the value of land they would be able to absorb any loss of value in the improvement on the land but in reality the land is sold along with the improvement and eventually the appraisal districts will not be able to make the total appraised value match the market value the property sold for. And most likely there will be lawsuits when the appraisal districts refuse to lower the total appraised value. Some appraisal districts will continue to maintain the market value is temporary as a result of the housing market being depressed. The reality is they overvalued property and kept overvaluing to be able to generate additional income and by doing so they actually manipulated the market value in many areas of the country.

In areas where the total appraised value is lower than the market value there will be no problems and they will continue to simply raise values which cannot really be protested. But in areas where the total appraised value exceeds the market value, there are going to be major problems.

Either way the reality is most municipalities are facing cutbacks simply because even increasing values is not going to cover the increasing costs of providing services to the citizens. The light bills alone will probably begin causing problems for many cities over the summer.

[notadmblnd]

2. I got my annual SEV and my property value went down approx 8000

but my taxable value went up. I don't know what's up with that, but the article is misleading

[Psephos]

3. Do what the rest of us do - when income drops, stop spending as much

I live in Michigan. It has become tiresome beyond description to hear that hard times are, umm, hard. City and state governments have budgeted as though annual increases in spendable revenue were perpetual. Now it's time for different budgeting.

Economic cycles are a constant of human history. In our personal finances we save money for rainy days. Governments should have done the same.

The world is not going to end. But some people aren't happy unless they're unhappy.

[slackmaster]

5. Amen!

I have little sympathy for bureaucrats who have allowed themselves to get addicted to spending other peoples' money with abandon.

Cut back to core services, lay off all non-essential personnel, sell off assets, defer pay raises for elected officials and managers.

[Mountainman]

18. I can see you have never worked for local government before.

Budgets are put together for fiscal periods about 6 months before the period begins. They are based on projections of revenue at that time. Fiscal year 08-09 budgets were put together starting in January of this year. Usually there are reserve funds and those are being used up covering deficits in the last fiscal year's budget.

Most local governments have made cuts in there fiscal 08-09 budgets. They see revenue falling and have put that in the budgets.

We are not all as short sited as you would have us be.

[soothsayer]

4. Good! Maybe counties will stop wasting money. I can't believe the stupid

things our county did when it was awash in cash. Of course, as others have said, they'll just raise the tax rate so they can keep that money rolling in. Wasteful bastards.

[pattmarty]

6. A HUGE problem with local real estate taxes is the.............

.........costs for the schools. Have the Feds take over education completely and it takes a lot heat off local municipalities. It's really a fucked up (and biased) way to finance education with local real estate taxes. I know that's a big change and will never be approved by ANYONE (at this time), but in the future this is the only way to have a excellent education system for our citizens.

[patriotvoice]

10. How is transfering local real estate tax to federal income tax a solution?

Our hearts are in the right place: education should be in the top 3 of our priorities.

But, federalization rarely leads to more efficiency and cost-effectiveness. Local muncipalities absolutely should maintain their schools: I don't want Bill Gates' tax money paying for my childrens' public education any more than I want to pay for Fannie Homemaker's children in California.

However, property taxes are absolutely not the way to raise money: sales tax is better. The more you consume, the more you pay. Essentials (bread, water) get the most favorable tax rate. Essential splurges (office supplies, beer, bicycles) get the next best. Non-essentials (electronics, cars, gasoline, etc) get the worst.

While we're at it, stop all taxing on income side (wages and wealth) and tax on consumption first, real assets last.

[pattmarty]

11. I think if you re-look at your statement that we "basically" agree.

The Federal government has the means and the ways to collect taxes efficiently and do it in a cost effective way. Federal schooling would at least be standardized (think McDonalds, although there's probably a better analogy) and you would have one department controlling it instead of a zillion counties doing it. There would be a HUGE amount of problems I concede, but as with "most" western countries they have some kind of federally subsidized program. And from your statement above about federalization leading to more efficiency, just look at the last 8 yrs and St Ronnie's 8 yrs and tell me about privatizing ANY FUCKING THING.

[patriotvoice]

12. Each state also has the means and ways

My vision: A Federal tapestry of guidelines, overseen and funded by the taxing machinery of the State, and executed by the local muncipality (eg county). Standardization is the best way to bring everyone to a passably acceptible level: but our children deserve better than "passably acceptible." The Federal government should set the minimum guidelines, but the state should excel above those and tax appropriately. Revenue should derive predominately from real sales via sales tax, then less from real income and real assets.

Privitization is a valid component of education, but its need should derive from the minimum Federal requirements and exist supplemental to the State's own program: tutors, for example.

[pattmarty]

15. Wholeheartedly agree. We need new ideas and ways to improve the system.

[MJJP21]

7. Nonsense

I don't think the story is accurate. Property taxes just don't fluctuate on the normal ups and downs of property values. Otherwise where was the outcry from homeowners when property values were increasing and supposedly their yearly taxes would have risen as well? I don't recall people losing their homes enmass because their taxes suddenly rose.

[Alcibiades]

8. Of course they didn't go up

At least the way it works here, tax values don't change annually. They do assessments--what, every eight years or so?--and base the taxes off of that. There are lots of folks around the country paying taxes on fairly old assessments that are way too low, even with today's market, and no one ever complains about that.

That being said, if you are in a market where you have not had your tax value change for weight years, and the value of your property suddenly doubles--I can see where that might be a problem.

[L0oniX]

13. Oh fuck them all ...damn St. Pete is attempting to fuck us over again for a new stadium.

Like the fuckin Devil Rays are worth anything but a bag of shit. Let the rich millionaire bastards pay for it for a change if they want it that bad. Leave us home owners alone.

[Earth_First]

14. Yet our village has spent 45K to study the impact and design of a 3 million dollar footbridge

to cross a creek in our area to connect to a trail that doesn't exist yet.

WOOT! :eyes:

[OhioChick]

16. Ohio is a close second. n/t

[AP]

17. In California, adjustments are only made when a property is sold -- rich families who own estates &

corporations sell their properties much less often than young families and middle and working class people. So there's a lot of very valuable property with very low assessed value, and it's owned by very wealthy individuals and corporations. They're going to have to fix that so that the property tax burden is allocated in much more sensible way.

[Mountainman]

19. There was a thing called Prop 13. Remember? That was put in place so people would not be taxed

off their land. Just because values go up that does not mean people have money to pay the increased taxes. Property like farms were being taxed at assessed values forcing people to sell land that was in their families for generations.

Of course some people would like to take that paper wealth for themselves in the form of higher taxes but it isn't yours to grab!

[AP]

21. The underlying ideas was good, but the implementation was hijacked by corporations

even if you like the underlying idea, you have to admit that it's not working if the effect has been to shift the tax burden off corps and wealthy families and on to middle class people.

Also, it's no coincidence that CA had the second best public schools in the country before prop 13 and have the third worst now. Who's paying because of that? Poor and middle class people.

Prop 13 needs to be fixed.

[noonwitch]

20. I live in Warren, MI

Our city/county taxes are low, compared to Detroit/Wayne or Southfield/Oakland. Still, there are a lot of empty houses that have been foreclosed on by banks-one was emptied out over the weekend.

We are supposedly taking in 15,000 Iraqi refugees. I think we have enough housing for them,considering the foreclosures, but I do think that if a community takes in that many refugees, the federal government needs to kick in some aid-we need more police, fire fighters and city services to accomodate that many new residents. We also need community development assistance (low interest business loans) to help both current residents and those coming to our city get a start in business.

The Iraqis could be a really good thing for our city-Dearborn is a thriving community with a number of residents who fled Lebanon in the 80s. There aren't many vacant homes in East Dearborn, and there are hundreds of stores, restaurants, and other businesses that have filled what would be empty storefronts, and this has spread to the Detroit neighborhoods that border on Dearborn. Those refugees came with money, not a death sentence over their heads because they helped the americans in Iraq. We will need some federal assistance-it's difficult, because Warren is allergic to federal money (they don't like the strings attached), unless it comes through defense contractors. A good example of this is that Warren does not have and never has had Section 8 housing, even though we are the 3rd largest city in Michigan. Back in the 70s, when those programs started, Warren was about as white as a city next to Detroit could get. Section 8 money meant no discrimination by landlords who would receive the assistance-the people said they didn't need federal money that badly.

Things in Warren are a little different, as far as the ethnicity of the residents goes. But there is still no Section 8 and there are no projects.