Monday, January 21, 2008

If Real Estate Values Fall Across The Board...

And municipal budgets across Wisconsin are based on property tax collections levied on devalued properties, and levy increases are limited by law:

What happens to municipal budgets and services, debt obligations, pension payouts and a host of other responsibilities?

I have posed this question before on this blog, dating back to September, when I said the biggest threat to municipal budgets was not the stalled state budget - - it was the threat wrapped up in a housing market decline, and a recession.

Paul Soglin comes at this general subject with some useful historical perspective, too. This is George W. Bush's Iraq War recession.

I don't have an answer, or a ten-point plan to bring about fiscal stability - - except having nerer begun the $250-million-a-day war in Iraq would have kept us out of it in the first place..

But I do know the obvious: most public budgets are made up of salaries and benefits to pay for the delivery of services.

So a municipality would have to have one heck of a rainy day fund, or massive new development solidly in the ground, or plenty of unused borrowing authority in hand to avoid layoffs and profound service cuts.

For an entity like Milwaukee County, already facing severe problems due to years of pension scandals, the results could devastating.


Anonymous said...

Levy increases are limited by State law but Tax Rates are not. Devalued property in a community simply means a higher Tax Rate assuming the same or 2% higher tax levy. The levy limit also is adjusted for net new development.

James Rowen said...

We'll see who wants to jack up the rate. Falling values are a danger to municipal budgets.