Housing Downturn Takes Toll on Cities’ Revenue

[marmar]

from The New York Times:



CHICAGO, Oct. 17 — Suddenly everyone wants more from Chicago’s taxpayers.

Mayor Richard M. Daley asked last week for a 15 percent jump in the property tax. Todd H. Stroger, the president of Cook County’s board, called on Wednesday for increases in sales, gasoline and parking taxes. And all that does not even begin to address ways of keeping the financially troubled bus and train systems running.

While Chicago’s case may be extreme, it is by no means unique. Across the country, local governments are feeling a financial strain driven largely by the nation’s real estate downturn. City finance officers predict slowing revenue even as they remain under pressure to keep spending, especially in areas like health care and pensions, according to an annual survey by the National League of Cities.

To handle budget deficits they now expect, many cities are increasing fees for services, and some are considering raising property taxes, said the report, to be released Thursday.

“We know what’s coming here,” said one author, Christopher W. Hoene, director of policy and research for the National League of Cities. “If the housing market continues to flatten out or even decline, we’re in for some tough times for cities.”

The signs are all around, in flattening property assessments (which mean flattening property tax revenue) as well as rising mortgage foreclosures, which also bode poorly for revenue collections.

In Milwaukee, where a new budget proposal would cut the number of firefighters on some ladder trucks, the value of residential property had been increasing an average of about 13 percent a year since 2001. But those increases slowed sharply during 2006, said Mark P. Nicolini, the city’s budget and management director.

In Palm Beach County, Fla., foreclosures rose to 4,830 in 2006 from 3,049 in 2005. And in just the first eight months of this year, the number hit 7,544, said Sharon R. Bock, the county’s comptroller and clerk. Vacant job positions in Ms. Bock’s office are going unfilled, and “it could get worse,” she said. ......(more)

The complete piece is at: http://www.nytimes.com/2007/10/18/us/18taxes.html?ei=5088&en=d3addb5027e40c7e&ex=1350360000&adxnnl=1&partner=rssnyt&emc=rss&adxnnlx=1192748604-RbsRsE5B8h4X1ZpeQbLPJg

[Skink]

1. To starve beast first create housing bubble.

[Igel]

2. What they don't say is the rate of increase in city budgets.

In the early '90s in California, the budget had increased far faster than inflation. When good times hit, the legislature decided that they were permanent--and increased dedicated spending to all kinds of politically important, and sometimes progressive, things.

Come a downturn, and the budget never even dipped down to what you'd have expected the budget to be from the previous economic down-turn + inflation. In other words, if they'd increased the budget each year to take into account inflation, and made *that* their base budget, they'd have had no problems. They could have used the excess for short-term projects, like, say, infrastructure. But they didn't.

Come the down-turn, all the non-discretionary things were cut, fees raised, taxes increased. So when the downturn ended, the budget increased faster than inflation again, so when the next downturn hits, you can count on the base budget being greater than or equal to the early '90s *inflated* budget plus inflation.

A lot of cities are in this boat. LA was. I saw Eugene do it. Rochester. They budget stupidly, and don't ever talk about the actual rate of increase. (The US government does the same thing--if we froze the budget in 2002 except for increases to cover inflation, even with war spending we'd almost certainly be in the black.)

[SoCalDem]

3. This is WHY you do not finance your government on the backs of homeowners

or any other ONE segment of your population.. You institute a FAIR tax that EVERYONE contributes to, and you set PRIORITIES for those tax dollars..

Smokers should not be in charge of financing children's health care

property owners should not be in charge of financing schools..

There is a LIMIT to what "specialty" segments of a population can "afford".

Communities used to be able to run their own utilities, their own infrastructure and schools and still have money left over for future planning..and the people who paid into those coffers had money left over for themselves..