by Bill McBride on 12/26/2011 09:48:00 AM
Monday, December 26, 2011
From Brady Dennis at the WaPo: Falling home values mean budget crunches for cities
Because of the time it often takes for property assessments to reflect falling home values, 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.As the article notes, some states cap the annual increase in property taxes (there is a 2% annual cap in California). For long term owners, this means their property taxes will continue to increase since their assessed value is probably still below the current market value. This will keep overall taxes from falling quickly in certain states.
For instance, Baltimore collected $815 million in property taxes during the most recent fiscal year, according to Bill Voorhees, Baltimore’s director of revenue and tax analysis. 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.
In California, property values are assessed annually - and most cities have already reduced assessments and taxes on many homeowners. Also in California, properties are assessed whenever ownership changes, and all the foreclosures and short sales have already pushed down property taxes. So these communities will probably not see a further dramatic decline in property tax revenue.
But there is still more pain to come in other areas.
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Posted by Bill McBride on 12/26/2011 09:48:00 AM