Cities To Take Hit As Property Taxes Drop

"In the current recession, real estate values are plummeting, foreclosures are rising and huge numbers of taxpayers are disappearing from tax rolls. 'The property tax,' says Guy Griscom, past president of the International Association of Assessing Officers, 'is the primary source of revenue for localities. Right now, it's threatened.'"

"Whatever the law may be in a given jurisdiction, it's inevitable that when assessed values fall, the tax base ultimately shrinks. There is less money to spend for public purposes. 'We are still in phase one of what is likely to be a several-year cycle of property tax revenue declines for locals,' says Chris Hoene, of the National League of Cities. 'We've only just entered the woods.'"

"Whatever the law may be in a given jurisdiction, it's inevitable that when assessed values fall, the tax base ultimately shrinks. There is less money to spend for public purposes. 'We are still in phase one of what is likely to be a several-year cycle of property tax revenue declines for locals,' says Chris Hoene, of the National League of Cities. 'We've only just entered the woods.'"

"And for many homeowners, the woods will be full of unpleasant surprises this year. For example, every state sets an assessment date for establishing the value of property in the coming tax year. In many states, that date is January 1. Property owners receive a notice of the evaluation and of what their property tax will be some three or four months later. If the value of a house drops between the assessment date and receipt of the tax bill, that downward change is rarely reflected in the bill. The gut reaction of the homeowners is often vitriolic. They see themselves as being taxed on an unrealistic and unwarranted value. This is especially true right now."

"'What taxpayers might not understand,' Griscom says, 'is that they are going to pay taxes at the end of 2009 based on the value levied at the beginning of the year.'"