This could be your town next. The rise in foreclosures, the dropping of property values, and the slowdown in the economy are not just affecting your bottom line, they are also hitting they are also affecting your local and state governments income.
Remember when things were going gangbusters in the economy way back in 2005?
Well, the local governments did not set aside the extra income for a rainy day, they hired more people and expanded the services they offered to constituents, and spent every last penny as quickly as it came in.
Now they are struggling to pay for their excesses as tax income plummets. Property taxes are declining and the local governments are doing all they can to keep every penny they can. When things were good they had no problem adjusting property taxes up, that is for certain.
But as property values drop, the tax authorities are scheming and maneuvering to do all they can from accurately reflecting property values to protect their tax base.
Here is a great example in Dekalb County in Georgia:
The question taxpayers must now decide is, “Have they gone far enough?”
That’s the central issue in a lawsuit filed last week challenging DeKalb County’s efforts to set 2009 values. The county sent out about 30,000 bills in April, less than half reductions.
Officials admitted they did not include foreclosures in their calculations even though a new state law mandated their consideration. They also raised values for some parcels even though a different state law froze values for three years.
So, last week they redid their calculations and sent out 95,000 notices, this time following the dictates of both new state laws. Hank Ruffin, DeKalb’s interim chief appraiser, said at least 40,000 properties will fall by more than 25 percent. ajc.com.
Meanwhile, the states and local governments are not looking to cut expenses. Instead they are looking for the federal government to bail them out.
The economic downturn has eaten into their tax bases as local businesses shut, houses are lost to foreclosure and there is a resistance to raising taxes. The risk to the federal government is that it could lose money if things get worse for municipalities and states. Although backing debt with a guarantee does not require an immediate outlay of funds, the federal government could have to cover losses if there are defaults — which could be substantial if the economy weakens or states and municipalities cannot bring their budget deficits under control. Nonetheless, these overtures by state and local officials reflect a sense — perhaps just a hope — that municipalities suffering from a downturn in revenues and creditworthiness may find some relief in Washington beyond the stimulus money the federal government already is spending. via the NYTimes
Sure, the answer is always to borrow more, not cut expenses. What world are these politicians living in?
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