Remember that slowdown in state revenues that we were warned about by our state’s chief economist ChangMook Sohn last year? Well guess what? It’s here!
Washington’s construction industry continues to expand, but real estate tax collections are $18 million below expected levels.
The state Revenue Forecast Council says taxable real estate activity in the past month was nearly 26 percent lower than a year ago, the sharpest decline in 12 years.
In related news, despite the fact that King County government (and Ron Sims specifically) have seen the revenue slowdown coming for nearly two years now, we’re now being faced with new taxes to cover the real estate shortfall.
King County Executive Ron Sims proposed three new taxes Monday, even as he warned that a slowdown in housing construction will strain the county’s general fund during the next two years.
Sims said in his annual budget address to the Metropolitan King County Council that he told his staff to “go back to the drawing board” in September after financial advisers warned that a downturn in construction would hit the county hard. The revised budget, which also calls for higher bus fares, trimmed 2008 spending in order to soften an expected 2009 budget shortfall.
…
Construction downturns are particularly challenging for the county because property taxes are the biggest source of money for the general fund.
Too bad nobody in King County government thought to restrain spending during the times when real estate was flying high and money was flowing in. Not that this is anything other than government business as usual, but it’s still annoying.
(Associated Press, The Olympian, 10.11.2007)
(Keith Ervin, Seattle Times, 10.16.2007)
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9 responses so far ↓
1
Ira Sacharoff
// Oct 16, 2007 at 9:34 am
I’m your classic liberal democrat,but….If property taxes have been increasing dramatically over the last few years ( and they have, I’m payin ‘em)you’d think the County would be flush with $$ and we. as citizens would have seen visible results ( new parks, better roads, better transit, new libraries, etc.) So where did all that money go? I know Sims et al spent it, but on what?
2
notabull
// Oct 16, 2007 at 9:45 am
If a pile of money comes in via tax revenues, this is what happens:
10: Democrats will spend all the money either on paying back debt from previous republicans, or on new programs that are ongoing in nature.
20: Republicans will cut taxes and set the stage for the downturn in revenue that will ultimately occur in the future, and then pile up the debt ready for the next wave of democrats to come in.
30: Goto 10
3
rose-colored-coolaid
// Oct 16, 2007 at 9:51 am
What I’m really disappointed about is raising busing fares. If there’s one major problem in this area that literally everyone agrees on, it’s that our transit really sucks. So how are increased bus fares going to help? I’d rather see a gas tax increase than a bus fare increase (and I don’t even ride the bus).
4
Ira Sacharoff
// Oct 16, 2007 at 10:17 am
Before I sold my soul to the devil and became a real estate agent, I worked for Metro for 23+ years, and I don’t agree that our transit really sucks. Oh, it definitely has problems, and they spend WAY too much money on looking good rather than on actual bus service hours, but at this point, bus service is highly political in nature.
Much of the new bus service is going to more expensive suburbs, in order to placate the politicians from those places. But what they deliver is inadequate service, buses that go from nowhere to nowhere and haul nobody. Within Seattle, they are catering to Greg Nickels and his boss Paul Allen by sinking money into the South Lake Union streetcar project. That’s not a bad thing, except that for all that money, they could have dramatically expanded inner city bus service.
5
casey1167
// Oct 16, 2007 at 10:22 am
I think you are missing the bigger issue that is going to blow up in the next couple of years. Property taxes pay for schools. (Sure we can argue about general fund, allocations, government waste, etc., but the big picture is local property taxes equal local school funding.)
The teacher’s union has been getting some good increases over the last five years (i.e. Marysville School strike a couple years back, etc.) The increases for education spending have been driven by increases in assessed value of homes. If you see assessed values stagnate over the next five years there is going to be a huge gap between the COLA adjustments and the tax revenues for the schools. It will take a good three years for this gap to really show up given the lag between the assessors valuation of property and the next years tax base, but it does not take a rocket scientist to know you can’t have increase in cash out flows if the driver for cash in flows is based on a percentage of assets that are stagnating or decreasing even slightly in value.
I see some major teacher strikes in the future…
Sorry if this has already been discussed somewhere else on this site.
6
Ira Sacharoff
// Oct 16, 2007 at 10:52 am
Over the last 5 years I’d say my property taxes have almost doubled. Even successful teachers union can’t brag that their members have seen their salaries double in five years. Still, I hear what you’re saying, that the bulk of property taxes does go to schools, and if a school district gets less money, it makes the school district less desirable, which makes wanting to buy a house in that school district less desirable, etc, unless home prices drop enough to compensate for that.
7
greenthum
// Oct 16, 2007 at 2:51 pm
I can’t remember a time when the Libs didn’t control King County politics and tax dollars. Even the Republicans in this state can’t control their insatiable desire to tax and spend. Why do they always act surprised when the money runs out?
I for one am looking forward to the housing crash. Maybe when people start losing their homes they will finally vote that idiot Sims out of office and elect someone who knows how to manage money!
8
Mr Goober
// Oct 16, 2007 at 4:42 pm
What you have to love is the optimism in Pierce County. They are proposing to add staff to the planning department to deal with the backlog in building permits. LOL
Assume nothing will change, until it does.
9
Seattle Bubble » Blog Archive » I-747 Tossed, R-67 Passed = More Market Downers?
// Nov 9, 2007 at 8:33 am
[...] boom in tax revenue have a way to deal with lower housing values and fewer home sales, which are already beginning to affect the bottom line. Now they can go ahead and lower the valuations, but just hike up the tax rate up to and keep [...]
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