Property value crashes in Kent County
Editor’s note: This is the first in a series of stories examining downward trends in the value of property in Kent County.
Can you imagine that all the real and personal property in East Grand Rapids and Cannon Township disappeared last year? Well, in a very fiscal sense that’s what Kent County Equalization Director Matt Woolford said happened.
Woolford reported last week that the county’s total equalized value for all real and personal property fell to $22.57 billion for 2010, a plunge of 5.18 percent from 2009. That percentage drop equates to $1.23 billion in lost value, which he said equaled the approximate total value of all property in East Grand Rapids and Cannon Township.
“I used to say it was my pleasure to present this report. I now say it’s my responsibility to present this report,” said Woolford to county commissioners.
To make matters worse for Kent County and the other 29 municipalities in the county that rely on revenue from property taxes, Woolford said the taxable value of all properties fell by 3.76 percent to $21 billion in 2010. The fall represents a loss of $820 million in taxable value in just one year.
“This is our first year for a decrease of actual taxable value,” said Woolford.
The taxable value had risen steadily each year since Proposal A went into effect in 1995. In fact, it rose by more than 6 percent in 1996, 1997, 1998, 1999, 2001, 2002 and 2006. A small consolation this year is the value fell by less than the $888 million that was projected at the end of last year.
Kent County Administrator and Controller Daryl Delabbio said the decrease would cost the county $493,000 in property-tax revenue for the current fiscal year, with $475,000 of that total amount not going into the general fund. The remaining $18,000 won’t make it into the capital improvement budget this year.
“For the actual year-to-year difference in general fund revenues, the reduction in (State Taxable Value) will amount to a reduction of about $3.3 million from 2009 to 2010,” wrote Delabbio in an e-mail to the Business Journal. “In terms of impact to the county’s general fund budget, the reduction in STV will result in a $493,000 reduction from the 2010 project revenues from property taxes.”
It was the third consecutive year the equalized value fell. But this year certainly had the biggest drop of the three. It was more than five times the decrease in 2008 and more than double last year’s 2-percent decline. As expected, a much lower residential property value was the catalyst for the steep decline.
The total housing value went down by 5.99 percent, or $900 million to $14.1 billion — which means that more than $2.4 million in value was lost each day in 2009.
Although home foreclosures played a role in the loss of residential value, Woolford said unemployment was the main culprit last year. He said this area didn’t have the spike in housing prices that regions on both coasts and in the southern states had, so the increase and decline in prices was smaller here.
“Since we didn’t have the really big increases of those housing markets, yet we still have a foreclosure problem, I believe that ours is more linked to the unemployment rate and the lack of jobs. Our bubble wasn’t as big and it didn’t burst as much,” said Woolford.
“But to the extent that our unemployment stays high and we don’t have people making the types of wages they need (to afford homes), I think a lot of ours is related to that,” he added.
Because the state really didn’t recover from the 2001 recession like the other 49 did, Woolford felt the county’s current problem is much more systemic and ongoing than bubble related.
“Michigan’s problem is more prolonged. We’ve been kind of immune from the ups and downs. We’ve been in sort of a general period of decrease and we’ve kind of skipped some of the recoveries of the recession and so I think ours is more systematic, in turn, and related to job growth,” he said.
A lack of new construction in the county didn’t help either. Woolford said he thought building projects would be worth about $100 million in State Equalized Value in 2009. Instead, he said there was about $88 million. “Unless you have a massive amount of new construction, the taxable value will stay down,” he said.
In addition, Woolford said the equalization report lags what actually happens on the real estate market. He said assessments will always lag and the taxable value will always lag even longer, as the 2010 report reflects what happened during 2009. “We follow the market. We don’t predict it,” he said.
A year from now Woolford said he expects that he will again report on another drop in countywide property value. “I think, in particular, we have yet to see the bottom in commercial and industrial classes. There is a lot of commercial paper resetting there, as well,” he said. “The first six months do indicate another down year in 2011.”
Next week: Woolford talks about commercial and industrial values.