The Tacoma News Tribune reports on a $7.2 million shortfall in the city budget, thanks to a 36% drop in expected real estate taxes:
The City of Tacoma may have to delay or slow construction on some projects in order to patch a projected $7.2 million shortfall from real estate taxes this budget cycle.
The shortfall represents a 36 percent drop from what the city expected to generate from real estate taxes: Officials budgeted for about $19 million of the $45 million fund from real estate taxes this biennium, but now project only about $12 million will come by the end of the year.
The drop comes because of a slower real estate market: Taxes collected from real estate sales are lower than expected, meaning there likely won’t be enough money to cover the projects slated for this biennium.
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On the list of possible cuts, according to City Manager Eric Anderson: deferring maintenance on City Hall, and eliminating $400,000 for major repairs to city buildings and seismic upgrades to fire stations around the city.
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Anderson told the City Council during an August study session that the city could also buoy the capital budget with funds from other areas, but that could be a dangerous proposition if the market doesn’t bounce back.
Hey no worries. It’s probably a safe bet to assume things will bounce back any day now. I hear we’ve been at the bottom since February or so.
David McManus » Sep 3, 2008 at 11:11 am
If only you stupid people would stop listening to the hype and just buy, everything would be ok.
Yes, I’m being sarcastic.
rose-colored-coolaid » Sep 3, 2008 at 12:10 pm
But Dave, I’m ready and eager to buy. If the sellers would just offer their 3000 sq ft brick SFH in Ballard to me for $250K, I’d buy tomorrow. If the sellers would just start listening to the hype and precipitously drop their price, everything would be OK.
Yesler Hill » Sep 3, 2008 at 12:14 pm
This is exactly why I am mildly amazed that the Seattle government is still so gungho abt an infinite horizon of tax money and bonds to spend. Tacoma is getting hit harder, first, but World Class Seattle isn’t far behind. I imagine that all the bond issues and tax raising proposals the city plans to put on the ballot in Nov are likely to fail.
A state and city income tax on high earners (say $200-$250k) would be a better solution than bonds and RE taxes; but the cowardly hacks in Oly didn’t bring it up back when the economy was strong, and now no one will bring it up. Or, maybe as the RE tax base drops away, someone will?! LOL. No.
Seattle Landlord » Sep 3, 2008 at 1:22 pm
Lord, There’s only 3 comments for this post? I guess this website is useless after all.
MarkM » Sep 3, 2008 at 1:28 pm
I think the website is plenty useful, it’s just that the article is about er um… Tacoma…. ;-)
Though not quite 100% local I’ve been here long enough to know that Tacoma has a bad reputation and some of it was deserved (remember when the Hilltop area was hopping in the news?)
But they have made some strides. Downtown Tacoma has had a makeover in recent years. A little “too heavy” on the museums but with the UofW Tacoma branch and all. Not to mention Schuster Parkway is fun to stroll along during the summertime.
I even played with the idea of buying in Tacoma and commuting (via Sounder) to Seattle but I work in Bellevue and my job often requires more than the typical 9am-5pm hours so decided to forego it.
Never quite figured out what industries are down there outside of the military bases. Quick, what’s Tacoma’s tagline? (scroll down for answer)
TJ_98370 » Sep 3, 2008 at 1:55 pm
Hmmmm. County level government funding will also be effected by decreasing assessed property values, yes?
softwarengineer » Sep 3, 2008 at 2:30 pm
TACOMA HAD PLANS FOR THAT MONEY TOO
They were going to build a new golf course and town hall strip mall too.
I imagine we’ll see a lot of half done Seattle area building projects too, as the uncontrolled growth debt crisis worsens and the bottom 80% “lunchbox Joe” household incomes get eaten alive by hyper inflation and wage stagnation.
I know, let’s further errode “lunchbox Joe” household incomes with more uncontrolled growth competitions for the few remaining jobs, that will fix it. LOL
Thomas B. » Sep 3, 2008 at 2:54 pm
Pfftt… bottom is a relative term… anything on the lower 50% of a hole may be classified the bottom. [Note: this is sarcasm].
crispy&cole » Sep 3, 2008 at 5:18 pm
The race to the bottom continues…the pattern of decent is the same one we are seeing in California..
Garth » Sep 3, 2008 at 6:11 pm
Seattle is definitely not California.
being patient » Sep 3, 2008 at 7:06 pm
Thank you for pointing that out again. It seems like so many people are quick to make that comparison.
Demersus » Sep 3, 2008 at 8:03 pm
You’re right, we’re not California. Our climate is far less desirable. But hey, why not buy a $500K condo today!
jonness » Sep 3, 2008 at 8:35 pm
Tacoma is absolutely going to crash and burn and has already started the downward slide. Notice it practically had as much risky-loan exposure in 2006 as Riverside.
High-interest loans in 2006: (total of all loans)
Riverside-San Bernadino-Ontario CA 38.70%
Tacoma WA 31.00%
Olympia WA 24.10%
Seattle-Bellevue-Everett WA 21.50%
Santa Barbara-Santa Maria-Goletta CA 19.50%
San Diego-Carlsbad-San Marcus CA 19.20%
This game is all about going underwater and asking yourself if you want to continue paying out the bulk of your paycheck for a house that’s worth less than you owe or if you want to walk away and save a fortune. The answer for impulsive subprime buyers is quite obvious. Of course, it’s not just subprime that’s fueling the current market. On a national level, prime foreclosures now outnumber subprime. And the option ARM resets don’t even really get started until 2010.
Seattle doesn’t have a whole lot of downward pressure yet. This allows delusional sellers to overprice their homes with the attitude that if it sells, they make a big profit, but if it doesn’t sell, they rent it for a couple of years and then sell for a huge profit when prices spike back up again. Unfortunately for them, price appreciation will not push past historic ratios with rent and income unless banks start loaning million dollar home loans to apple pickers again. Thus, the delusional sellers are going to get pummeled by their own greed and lack of insight.
2009 is going to be an ugly, ugly year for Seattle house prices, and the best we can hope for after that is a sideways market as we drift into the Option ARM mess. Market psychology is a fairly predictable phenomenon. Now that the effects of the 150+ billion dollar tax break is losing its effect on GDP, the only spike in Seattle sales will be in the area of anti-depressants. Unless you’re saving your money and waiting for prices to come down that is.
patient » Sep 3, 2008 at 8:54 pm
This again puts some light on one of the members of the power cartell of the housing price cheerleaders. The local politicians. High prices and high volume means big tax revenue. You got the MSM that is totally corrupted by advertising money, the financial institutions that want to avoid foreclosures to limit their exposure and losses, the politicans that want real estate taxes to balance their budget, you got the NARs with it’s deep pockets and you have the federal government that wants to avoid a recession for the chance to be re-elected. That’s a pretty powerful constellation of money, influence and media. Just remember that no-one can force you to buy an overpriced home. In the end it’s us the buyers who will set the prices independent on how powerful the other side is. Be smart, patient and financially conservative
Yesler Hill » Sep 3, 2008 at 10:54 pm
Tacoma is a steady working class and middle class city. It’s Seattle that will really hit bottom hard, Tacoma isn’t nearly so full of it self as Seattle, it’ll be a great deal bloodier here.
shawn » Sep 3, 2008 at 11:04 pm
the NW wants to be as big time as NYC, LA, and SF, so just raise parking fines to make up the diff.
david losh » Sep 4, 2008 at 7:24 am
This is the biggest problem in Real Estate. Municipalities extorting tax dollars from consumers. The fire stations may collapse unless these municipal tax dollars keep coming in.
Let’s issues some more building permits to get our economy going again. Hey, don’t look behind the curtain. Don’t look what those building permits will cost you down the road. Our government needs those tax dollars today or you won’t get police protection, we will need to cut school spending, and we won’t have a fire department any more.
EconE » Sep 4, 2008 at 8:54 am
David…
just build a bunker, buy a bunch of guns & ammo and homeschool your kids.
Problem solved!
johnnybigspenda » Sep 4, 2008 at 8:58 am
talk about BS… Tacoma politicians spend money faster than it comes in and then blame it on the real estate downturn.
Umm…. house prices tripled in 10 years…. their property tax collections TRIPLED…. they didn’t have any problem spending that extra money did they?
This article is pure blame game BS.
Ray Pepper » Sep 4, 2008 at 10:00 am
Yesler I do agree parts of Seattle will get rocked much worse. In particular I target West Seattle. In North Tacoma we have the same Brick Style Tudor homes that are easily 300k less and without any of the traffic problems and easy access to I5. Evertime I look at the over priced 1940’s homes West of 35th I’m shocked at just how much more people have paid for those homes in the last 5 years. The secret of Tacoma lies in North Tacoma (Proctor) . Careful West Seattle Buyers.
Civil Servant » Sep 4, 2008 at 12:06 pm
Some numbers in case anyone is interested. “Housing and construction markets” were responsible for nearly half of the state’s $1.4bn budget surplus in 2006 [1]. The City of Seattle General Fund increased by 9% from 2006 to 2007, to $842M, with 2/3 of that growth rate due to the economy and the remainder from previous’ years unspent surpluses [2]. I can’t find a citation now, but I remember reading that 40% of job growth in Seattle over a recent five (?) -year period was in real estate, construction, real-estate financing, etc. So it’s not inconceivable that we could be reading the same story about Seattle a few years down the line.
TJ @ 6, yes. Also, real estate excise taxes collected in King County almost doubled between 2004 ($250M) and 2007 ($476M). A combination of falling prices and falling sales volume could jack that back down fast.
[1] http://www.awb.org/articles/magazine-jan2006/be_cautious_about_spending_the_surplus.htm
[2] http://www.cityofseattle.net/Council/Conlin/miw/0610miw.htm
Buceri » Sep 4, 2008 at 12:40 pm
What does this guy know???
U.S. House Price Decline Could Be Worse than Great Depression, Economist Shiller Says
Posted Sep 04, 2008 01:36pm EDT by Henry Blodget in Newsmakers, Recession
Eight years ago, Yale superstar professor and MacroMarkets chief economist Robert Shiller famously called the top of the stock market in his book Irrational Exuberance. Then, a year before the housing bubble peaked, he predicted the colossal bust we are now experiencing.
If you recognize Shiller’s name, it’s because the Standard & Poor’s/Case-Shiller home price indexes, which he developed with Wellesley College economist Karl Case, have become the nation’s most authoritative source for home price trends.
In part one of my one-on-one with Shiller, we discuss the grim outlook for U.S. housing, which he tackles in-depth in his new book The Subprime Solution. Highlights of our first discussion include:
* Home price declines are already approaching those in the Great Depression, when they plunged 30%t during the 1930s. With prices already down almost 20%, it’s not a stretch to think we might exceed that drop this time around.
* There are about 10 million homeowners whose debt is higher than their home value, which has broad implications for how Americans feel about their wealth and spending habits (read: more pressure on consumer spending).
* The current hopeful consensus — that house prices will bottom soon and then begin to recover — is most likely a dream. Housing markets don’t usually have “V-shaped” recoveries. And even if house prices stabilize in nominal terms, after adjusting for inflation, most homeowners will continue to lose money.
Met » Sep 4, 2008 at 1:55 pm
Had to laugh at the sarcasm especially after reading about the DOW dropping 300 points today.
Tim – “Hey no worries. It’s probably a safe bet to assume things will bounce back any day now. I hear we’ve been at the bottom since February or so.”
Even the San Francisco Fed President agrees, from the CNN article Here
“San Francisco Fed president Janet Yellen said that the credit crunch is severe and deepening and that the housing market has not bottomed yet.”
Civil Servant » Sep 4, 2008 at 2:59 pm
I love the irony of Shiller getting interviewed by Henry Blodget.
http://en.wikipedia.org/wiki/Henry_Blodget