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Property Tax Revenue Drop Adds To Counties' Woes

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Property Tax Revenue Drop Adds To Counties' Woes

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Property Tax Revenue Drop Adds To Counties' Woes

Property Tax Revenue Drop Adds To Counties' Woes

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  • <iframe src="https://www.npr.org/player/embed/105225149/105240993" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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In the Antillean Isles subdivision in Homestead, Fla., some homes have sold for less than a third of what they cost a year ago. Only about 30 of the planned homes were finished before the builder went bankrupt. Greg Allen/NPR hide caption

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Greg Allen/NPR

In the Antillean Isles subdivision in Homestead, Fla., some homes have sold for less than a third of what they cost a year ago. Only about 30 of the planned homes were finished before the builder went bankrupt.

Greg Allen/NPR

After facing tight budgets in recent years, many city and county governments now see a new financial time bomb in their future.

In states like Florida, California and Nevada, the collapse of the housing market has driven down home values dramatically. That means lower property tax revenue. Counties across the country say property tax collections may decline by 10 percent or more over the next few years.

In Miami-Dade County in Florida, officials have determined that the property tax rolls have already declined nearly 10 percent from last year. County Mayor Carlos Alvarez says that comes after two tough years when officials wrestled with budget deficits and spending cuts.

"What we're talking about is trying to fill a gap — a revenue shortfall — of anywhere from $350 [million] to $400 million," he says. "That's on top of the $440 million shortfall that we have faced the last two years. So, compounded, you have some very, very serious challenges."

Homestead Hit Hard

No community in Miami-Dade County has been hit harder by the housing bust than the town of Homestead. A few years ago, it was one of the nation's fastest-growing communities. But in the last year, home prices dropped by 50 percent.

Antillean Isles is one of the town's subdivisions that remain mostly empty lots. Only about 30 of the planned homes were finished before the builder went bankrupt. Homes that sold a year ago for more than $300,000 now go for $100,000 or less.

Citywide, housing assessments went down by 18 percent this year. Homestead is now facing at least a 10 percent budget cut.

The worst part is that it's not just a one-year problem, says City Manager Mike Shehadeh.

"If we were dealing only with one tax year, with a reduction of 18 percent, I would tell you that, you know, we'd definitely find a way to fix it," he says. "But what all cities, actually, and all managers are worried about is the next year and the year after."

A Familiar Picture

In South Florida and around the country, there are few signs that the housing market has hit bottom yet. Foreclosures continue to rise in many areas. In overbuilt communities like Homestead, lower home values — and lower property tax revenue — are likely to be a fact of life for the foreseeable future.

It's a similar picture in other parts of the country where the housing boom has gone bust. One thing that differs, though, is the timing.

Home values dropped 23 percent over the past year in the Phoenix area. But county officials say the bills going out to homeowners this summer are based on last year's property tax assessments — giving them another year to prepare for the worst.

In California's Riverside County, budget officials are staring at an 11 percent drop in property tax receipts. In the Las Vegas area, "we're going to see the first property tax decrease that we've ever seen in I don't know how many years — probably at least 30," says Michele Shafe, the assistant director of the Clark County assessor's office. "We're looking at about a 5 percent property tax decrease."

Tax Increases Ahead?

Property tax revenue accounts for 50-60 percent of a typical county budget — funding everything from schools and police to trash pickup. Over the past two years, many local governments have struggled with declining revenue from sales tax and other sources hit by the recession. Counties have cut personnel and benefits, frozen hiring and required employees to take furloughs.

In Miami-Dade County, Mayor Alvarez says there are no more easy cuts to make. It may not be a popular idea in the midst of a recession, but he says the county may have little choice but to consider raising taxes.

"It's going to be almost impossible to make up that revenue shortfall of almost $400 million by just cutting services," he says. "I'd rather see a small millage increase than to lay off 3,000 or 4,000 employees."

There's another aspect of the property tax shortfall that worries some county officials. In places like Miami, local governments are major economic engines. If they're forced to make big cuts in services and spending, some worry it could be a drag on their regions' economic recoveries.

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