The City Needs to Plan Now for the Real Estate Downturn!!!

[Bill Call]

City officials are confident that the next real estate tax appraisal will increase property tax revenues by 10%. I am not so sanguine.

It is far more likely that the next appraisal (if it isn't a complete fraud) will result in a 10% reduction in property values. That means property tax revenue will be 20% less than budgeted.

State and local governments have grown fat off record housing prices. Rising revenue has shield them from their own inefficiencies.

The longer the City pretends the problem does not exist the more painful the solution.

Lakewood is not alone, see:

http://www.nytimes.com/2007/10/18/us/18 ... ref=slogin

[Jennifer Pae]

Bill - I really appreciate your concerns on these issues, but I'm going to have to defend my honor

Forecasting anything is an art. You deal with the best information you have at the time based on what you've seen in the past (trend analysis), and your best guest about what might happen.

I shared with you that the City's property tax revenue projections are based on prior year trends.

Even going back to 1971 (we've had a few economic downturns since then), the average increase with each three year reassessment is 11.63%. The highest reassessment increase was in 1980 at 29.02% over the prior year. The lowest property reassessment increase was in 1973 when there was a decrease of -0.35%. The average annual increase between reassessments has been 0.31%.

The reassessments over the past 10 years have averaged just shy of 10% at 9.61% over the prior year's assessed valuation total.

The current five-year forecast reassessment estimates (next one occurring is 2009 with collections in 2010) a 10% increase with 0.5% annual decrease after reassessment.

The actual budget estimates are even more conservative since they are based on prior year actual tax collections, and the County's own estimate that is provided to the City each November.

The housing market and the foreclosure issue, and their impact on property values is a serious issue. And this city official is not sanguine, but cautious.

[Bill Call]

Forecasting anything is an art.

That's true. Have you considered applying to the Secret Arts Star Chamber Committee for an art subsidy?

I have a great deal of respect for you and your staff. You all do excellent work.

Over the last few months Lakewood real estate has been selling for about 10% less than county appraised value. Other communities in the area are
experiencing the same downturn in prices. I happen to think that weak demand will put increasing downward pressure on housing values.

Housing prices in Michigan declined by 17% last year and there is no reason to believe those prices will rebound. Housing can depreciate in value. The double digit increases of the last few years were an aberation.
See:

http://www.mindfully.org/Reform/2007/Bu ... 3sep07.htm

Of course it is possible that Lakewood could fare better than most communities. Our houses are better built, they have not appreciated as fast and so might not depreciate as fast, the slow housing market means a good rental market and even in this dismal market Lakewood homes are selling.

I am not sure your budget analysis is wrong, I just think that in this market conservative budgeting isn't conservative enough.

[Jim O'Bryan]

Forecasting anything is an art.

That's true. Have you considered applying to the Secret Arts Star Chamber Committee for an art subsidy?

I have a great deal of respect for you and your staff. You all do excellent work...


I am not sure your budget analysis is wrong, I just think that in this market conservative budgeting isn't conservative enough.

Oh how Bill Call of you!


.

[Bill Call]

Oh how Bill Call of you! .

Is that good or bad?


See:

http://en.wikipedia.org/wiki/Boiling_frog

[Brad Hutchison]

Boiling Frog is a nice metaphor. Thought you were a total freak through the first paragraph, however.

[Jim O'Bryan]

Oh how Bill Call of you! .

Is that good or bad?


See:

http://en.wikipedia.org/wiki/Boiling_frog

Bill

For those of us that know you, it is probably good, fun and frustrating. I believe you would see that as a good and proper response.

Is this what you meant?

From Wikipedia
"The story has been challenged by one or more recent experiments.[9] However, in these experiments, the temperature was increased at a rate of 2°F. per minute (or 0.019°C. per second), which is almost 10 times faster than the rate of temperature increase in the 1882 experiments.
Professor Doug Melton, Harvard University Biology Department, says, "If you put a frog in boiling water, it won't jump out. It will die. If you put it in cold water, it will jump before it gets hot -- they don't sit still for you."[10]"

.

[Jeff Endress]

I think, in the future, that those who wish to use metaphores need to also use a signal that this is the intention. Those of us with limited capacity get easily confused