It seems that local governments have set themselves up for failure when the housing madness finally cools off, even if it’s just a slow cool down rather than a bursting bubble.
New development in Tumwater is filling the city’s coffers with the revenue from building permits and one-time taxes on construction.
But city officials fear the bubble will burst and the city will have to cut services by more than $500,000 as early as next year.
“We’re in a good position now, but we’re going to run out of (new construction) money in the next six to 18 months,” [city finance director Gayla] Gjertsen said. “We’re not sure how long the construction season’s going to last.”
Obviously if home prices decline then many local governments’ budgets will be hurting since property tax income will decrease. But that would only be a problem if there is a bubble, and it “bursts.” The problem Tumwater is facing will be a reality even if there isn’t a bursting scenario. Rapid construction of new businesses and homes can’t possibly continue indefinitely. What a shock that government is spending money without an eye toward the future.
(Jennifer Latson, The Olympian, 08.23.2005)