AGA Today
Housing Downturn Takes Toll
on Cities' Revenue
By
MONICA DAVEY
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.
In Cleveland,
revenue from building permits has fallen about $450,000 short of
projections this year. Further, foreclosures have limited the city’s
ability to borrow money, because municipalities borrow against the
assessed value of their property base, said Sharon A. Dumas, the
director of finance. Cleveland had hoped to borrow about $45 million
this year for capital projects, Ms. Dumas said, but now the number will
most likely be closer to $35 million.
For the moment,
she said, the city is finding relief in an unlikely place: baseball.
Taxes on tickets for the Cleveland Indians’ postseason games against New
York and Boston could bring in more than $1 million.
In interviews,
some city and county budget officials said the direct effects of the
housing downturn could have a lag time of several years when it comes to
local government revenue, whose level depends on property reassessments.
Some pointed to factors particular to their cities — a loss of state
aid, perhaps, or legislation limiting local property tax collections —
as more dire.
“In some
respects, this may be a correction,” Mr. Nicolini, of Milwaukee, said of
the real estate decline. “If the job market stays relatively strong,
it’s less of a concern. But if the trend were to continue, then it gets
worrisome.”
Even in New York,
where revenue has soared the last several years, officials have been
predicting a slowdown and are preparing for belt-tightening. The
anticipated falloff is due in large part to lower expected profits on
Wall Street and a projected decline in real estate transactions, rich
sources of tax revenue.
“The good times
don’t go on forever,” Mayor
Michael R.
Bloomberg
said Tuesday, “and while I don’t think we’re going to have a recession
in this city, I think it’s probably true that we will have a slowdown in
economic activity, a slowdown in tax revenues.”
The report from
the National League of Cities was based on responses from finance
officers in 359 cities, all with populations of 10,000 or more, from
April to June. It found that 7 in 10 believed their cities were better
able to meet fiscal needs during 2007 than in 2006, but that many were
quite pessimistic about the years ahead. In the Midwest, the picture was
already grim: almost half reported that their cities were less able to
meet their financial needs this year than last.
Some local and
state governments built up large surpluses in recent years, which, they
hope, will cushion them now. Next month, the United States Conference of
Mayors meets in Detroit to look at the real estate downturn and its
effects on residents and municipal budgets.
In Chicago,
meanwhile, Mayor Daley confirmed Wednesday that he was pondering yet
another way to raise money: selling or leasing city parking meters to a
private company. Questioned about the notion, Mr. Daley pointed to
everything he must pay for.
“How are you
going to do all this?” he said.
Diane Cardwell
contributed reporting from New York, and Catrin Einhorn from Chicago.