Are local governments setting themselves up for budget troubles if/when housing takes a downturn? That is to say, are they taking increased revenues from the high volume and high price of home sales and using them for regular operating expenses, rather than treating it as a surplus?
More tax money is forecast to flow into Snohomish County coffers in 2006, but the county appears to be in a tight budget year anyway.
…
The county is riding a wave of higher-than-expected tax revenue collections, chiefly real estate excise taxes from high home sales prices and the number of homes sold. Those taxes are forecast to be $19.7 million by year’s end, up $5.6 million.
For Snohomish County it would appear that the answer is “yes.”
(Jeff Switzer, Everett Herald, 09.12.2005)
During the dot-com boom/bust, local govts. put themselves in the red by overbudgeting. They’re still recovering from the tech bust, and now this. Pure genius.
If Snohomish County uses extra income for needed infrastructure repairs or improvements, or pays down debt, they will gain an advantage. If they use the money for current expendatures, they will find themselves short later when things calm down.