Local Governments Budget for the Bubble

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.

P.S. (That darn Ben Jones, he beat me again.)

(Jennifer Latson, The Olympian, 08.23.2005)

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

2 comments:

  1. 1
    David says:

    Its hard to compete with Ben Jones. He is certainly the leader of the Housing Bubble Bloggers. Your local reporting is rock solid. Keep it up.

  2. 2
    HighSierraGuy says:

    Tim The Tim:

    Agree with “david” 100 %. No wait, 110 % someone else just made another offer. Anyway, big time kudos for creating this blog.

    I feel like a voyeur, interloper or at least an apologist, logging in from Northern Cal.

    Nonetheless, it’s intriguing to me to follow the price escalation/inventory growing/rent/buy ratio occuring from Sacramento (home base) over to Marin, Sonoma, and all other “livable” counties north, south, and in-between. And now (or perhaps concurrently) the Pacific Northwest. Idaho, Montana,…

    (Forget about SoCal, anybody right in the head living in/around Seattle could not fathom a life in L.A.).

    It’s no wonder Californians arrive virtually anywhere wearing a bullseye on their chest and backside. We’ve exported our insanity and its spreading worse than WNV.

    Anyway, from what I gleaned from an earlier post, you’re doing the sane, rational, circumspect right thing. I’ve got about twenty something years on you and really only now recognize that patience is truly the virtue that old adage says it is. Cash will again be King, its only a matter of time.

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