The more municipalities go broke, the more the rest of the community will suffer “trickle-down” insolvencies. Falling property values means falling tax revenues. Municipalities and special districts are buckling under the pressure. As different communities have different needs, each provides for the variety of such needs, and each receives its money on real estate tax bills for police and fire districts, water and sanitation, recreation, health services, libraries, pest abatement, and more. Taxpayers pay, but the trend is changing.
County assessors must reflect real values. The values are declining. Today’s valuation likely is above next month’s valuation, and in some states, way above. Try forecasting budgets with declining revenues – sounds like a late-stage Ponzi scheme! The trend toward declining valuation, then, later in turn, declining revenues, is a key indicator for “trickle-down” insolvency.
Budget cuts for 2012 have just begun. Some municipalities and special districts have financially bottomed-out from the crash of the past several years. Most are still on their way down – with the bottom not yet in sight. Board- and council-members trying to operate municipalities and special districts cannot predict budget shortfalls because the county assessors cannot obtain realistic values. And after best efforts to assess fair values, assessors will pass the unhappy burden to county treasurers who then will have trouble collecting.
Colorado’s Assessed Valuation is $5 billion less than last year’s assessed value. Illinois is even more depressed. Rhode Island is a disaster. California, too.
Special districts must rely on their local tax base for funds – they have no access to lottery funds, and they have no or limited access to State funds. Unfortunately, special districts over the past ten years spent like a drunken sailor. The local taxpayers now do not have the money to pay increased taxes, and it’s difficult to go to the State to get money, especially when the State is also broke.
Administrators can try for possible savings through negotiations with firefighters’ unions, government employees unions, teachers unions and police unions and others. The negotiations will mean job cuts. Administrators’ legal bills are going up because more bondholders and other creditors sue. Some progressive local taxpayers are considering suing administrators to impose personal liability based upon administrators’ reckless spending.
For now, financial efficiencies must be sought by local board- and council members. The unfortunate result is more job losses and more facilities closed and street lights turned off. Perhaps the unprecedented and absurd government spending of the past dozen-or-so years can be reversed. In the near term future, local government malaise portends more “trickle-down” insolvencies.