Property values slide again

April 27, 2009
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When Matt Woolford delivered his bureau’s equalization report to county commissioners last year, he called it “historic,” because it was the first time the value of all real and personal property in the county fell since at least 1989 — and, perhaps, for the first time ever.

But when Woolford delivered this year’s report last week, he didn’t label it as historic because it was a repeat of last year.

“It’s a magnitude of a little bit less but it’s just continuing the trend we saw last year,” said Woolford, deputy director of the bureau of equalization for the county.

“Last year represented sort of a sea change in terms of it was the first year we saw a substantial decline in value in Kent County. It’s reflective of the climate that we’re in, with foreclosures setting record numbers, and the number of sales that are going into the markets are reflecting those numbers,” he said.

The value of all real and personal property dropped by 2 percent over the last year, falling from almost $24.3 billion to $23.8 billion. The value of all real property fell by 2.2 percent in a year, dropping from $22.4 billion to $21.9 billion for a loss of $498 million.

Here is the breakdown:

  • Residential value fell by 4 percent, from $15.6 billion in 2008 to $15 billion in 2009, a loss of $625 million.

  • Commercial value dipped by two-tenths of a percent, from $4.629 billion in 2008 to $4.620 billion in 2009, a loss of $8.8 million.

  • Industrial value rose by 7.3 percent, from $1.833 billion in 2008 to $1.967 billion in 2009, a gain of $134 million. (But the value fell by nearly 6.7 percent from 2007 to 2008.)

  • Agricultural value rose by six-tenths of a percent, from $310.3 million in 2008 to $312.2 million in 2009, a gain of $1.9 million.

  • Personal property value went up by seven-tenths of a percent, from $1.88 billion in 2008 to $1.89 billion in 2009, a gain of $12.58 million.

“This year continued that (downward) trend, and we’ll probably see at least one more year of this trend into the foreseeable future,” said Woolford.

As for foreclosures, Woolford said these actions are measured on an indirect basis for the county’s report, as directed by the state. State law requires municipal assessors to only record sales that weren’t made under duress, like a foreclosure.

“We’ve got brand-new white towels — those are the good sales, and brand new red towels — those are the foreclosure sales. We throw the red towels and the white towels into a load of laundry and they mix together. The assessor is required to only measure the white towels. Well, when they come out of the laundry they’re going to be pink,” explained Woolford.

“So the impact of the foreclosures is being measured — it’s just being measured indirectly, not directly from the foreclosures because those sales are under duress.”

Woolford said one problem that arises from using this method is the price some parcels sold for will be understated in the report.

“Foreclosures normally sell at a 20 percent discount from normal sales. But keep in mind not every parcel in Kent County was under foreclosure. So these are a subset of the market. So, therefore, the way they are being measured is fair to everybody,” he said.

Another notable element of the report is that the gap between the equalized value and taxable value shrank to 8 percent over the past year, the narrowest since 1999 when it was also 8 percent. Last year, the gap was 10 percent. In 2007, it was 12 percent.

When a property’s equalized value meets its taxable value, the tax on a property becomes frozen. But Woolford told county commissioners the two values will never completely come together.

Having the two values meet at the same point would be awful news for county revenue, as Kent largely relies on property tax receipts for its general fund — and those won’t increase while expenses will.

County commissioners cut more than $3.3 million in expected revenue to this year’s fund last week, and three of the four revenue reductions they made are closely tied to real estate values and transactions.

Commissioners lowered the general fund’s expected property-tax revenue by $1.2 million, receipts from the real estate transfer tax by $1.1 million, and income from recording fees by $19,200. Another $1 million was cut from the interest on investments the county projected.

To offset the revenue reductions, commissioners agreed to transfer $440,000 from the delinquent tax fund to the general fund. Commissioners also suspended construction of an administration building at Millennium Park for the parks department and a new facility on the Fuller Avenue Campus for fleet services. The $3.2 million targeted for those projects was returned to the general fund.

“This probably was the prudent thing to do, but not a pleasant thing to do,” said County Commissioner Harold Voorhees.

The revenue reductions and income transfers leave the county with a need to tap the reserve fund for $356,752 in order to balance the general fund for the current fiscal year, which will drop the reserve to $1.6 million. The 2009 general fund totals $169.9 million.

“We really have to stop the bleeding and change the perception that the county has unlimited funds. This is really, really serious,” said Daryl Delabbio, county administrator and controller. “We can’t predict to any degree of certainty our revenue.”

County Fiscal Services Director Robert White told commissioners back in January that the revenue estimate for the general fund would have to be lowered by at least $3.2 million. Earlier this month, he said the fund was facing a $5 million deficit for the current fiscal year and a $15 million shortfall for 2010.

“While this might be difficult today,” said County Commissioner Rickard Vander Molen last week, “I would expect it will be more difficult next year.”

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