After suffering 30 percent or greater losses in the value of their homes last year, homeowners are looking forward to a silver lining in the form of lower property taxes as assessments adjust to the new real estate reality.
Unfortunately, for millions there may be no silver lining.
Nationally, property tax revenues rose 6.2 percent in 2008 according to the National League of Cities, but increased only 1.6 percent last year as property assessments, which are usually conducted every three years, reflected lower values.
However, many local governments are refusing to let property tax revenues shrink. Saddled with recession-related revenue declines in retail taxes and fees, and reliant on property taxes for 30 to 40 percent of their budgets, local governments across the country are responding to the threat to their bottom line by raising property tax rates. In fact, local government’s across the nation are facing fiscal crises this year. Prohibited by law from operating in a deficit, 56 percent of counties reported starting their current fiscal years with up to $10 million projected shortfall, according to the National Association of Counties. More county officials blame their budget shortfalls in property tax revenues than any other factor.
Tax increases are quietly underway across the nation. In New York State, property owners paid an average of 5.4 percent-$2.5 billion-more in property taxes last year than in 2008 despite a 12.4 percent decline statewide in the median home price over past two years, according to the Business Council of New York State.
In Minnesota, city property taxes are expected to increase by 5.4 percent from 2009 to 2010. The Wisconsing Taxpayers Alliance predicts net state property taxes, on average, increased by about 4 percent in 2009, and school district taxes, on average, will increase by 6 percent.
In Chicago, Mayor Daley won cheers locally when he announced Chicago city dwellers wound see no property tax increase in 2010. But it didn’t mean much, since Cook County’s property owners were already under siege from 2009 tax increases that raised suburban taxes an average of 10 percent and city taxes as much as 20 percent. Some lower income areas saw the highest percentage spike; the median rise in the West Garfield Park neighborhood topped 46 percent.
Massachusetts homeowners saw property taxes rise an average of 5.1 percent statewide in 2009 after a 4.8 percent hike in 2008. Now, 276 of the state’s 351 municipalities can’t raise taxes any higher without getting local voter approval, according to the Massachusetts Taxpayers Foundation.
Voters aren’t in a mood to approve higher property taxes. In many cities, taxpayers filing record numbers of challenges to their assessments as they struggle to get assessments to reflect the diminished value of their homes. Relentless property tax increases have ignited a taxpayer revolt in some states.
Indiana Governor Mitch Daniels recently signed legislation providing homeowners an average tax cut of more than 30 percent on 20009, a total of $870 million in immediate relief on homeowners’ 2008 bills. Beginning this year, Indiana property taxes will be capped at 1 percent of assessed value. Apartment and agricultural land taxes top out at 2 percent, and business property at 3 percent. The revenue loss to counties, as estimated by the state’s Legislative Services Agency, is $74 million in 2010.
From Harford, Maryland to Augusta County, Virginia and Orange County, North Carolina, taxpayers sought to stop increases in local property taxes, most of them unsuccessfully. In California, meanwhile, homeowners last year celebrated the 25th anniversary of Prop 13, the granddaddy of all property tax revolts. Proposition 13 amended the state constitution to cap property taxes in the state, reducing them by an average of 57 percent.
Cities and citizens are facing tough choices among unpleasant options. Baltimore is just one of many localities considering a property tax hike. Here is what the Baltimore Sun editorialized last month: “City Council members were right when they said in a briefing this week that increasing the property tax should not be the answer. In this economy, in a city where unemployment is high in the best of times, where the property tax rate is already a massive disincentive to families looking to buy a home, tax increases should be the last resort.”