Kent’s taxable value likely to drop again
Kent County Fiscal Services Director Steve Duarte recently told commissioners that the State Equalized Value for all real and personal property in the county rose by nearly $1.7 billion from 2005 to 2009 for a gain of 7.64 percent. What makes the gain even more remarkable is that it included a 2 percent drop in SEV for 2009.
Over the same period, Duarte said the taxable value went up by almost $2.8 billion or 14.6 percent. That five-year gain included a miniscule rise of just three-tenths of a percent in 2009.
The changes in 2009 were precursors of what was coming in 2010: The countywide SEV fell by 5.2 percent and the taxable value dropped by 3.8 percent for this year.
“It’s a significant impact on our strongest source of revenue,” said Duarte.
Property-tax revenue accounts for almost 52 percent of the county’s revenue for its general fund, which covers most of the services the county provides. The unaudited figure for last year shows the county received $86.6 million from property owners, while the projected number for this year is $85.7 million, or about $900,000 less than last year.
Total revenues to the fund this year are expected to be $165 million, or $1.7 million below last year’s amount. The drop in expected property-tax receipts accounts for 53 percent of the total revenue loss for a budget that has a projected deficit of $3 million.
But Duarte pointed out that the situation may correct itself in the coming years because the taxable value is nearly 7 percent below the SEV, which means the taxable value has room to grow and increase property-tax revenue to the county.
“We’d like to think the downward pressure on that market has stabilized,” he said.
County Equalization Director Matt Woolford said an increase in taxable value depends on two factors — the Consumer Price Index and growth in properties that are taxable — and he doesn’t see a gain coming this year.
“I’m projecting a 1 percent decline based on six months sales in the residential class. That’s my best guess now,” he said.
The value of homes fell by $900 million last year; the residential class represents about 63 percent of the county’s total taxable value. And even though Woolford said the industrial and commercial classes haven’t hit bottom yet, he didn’t eliminate all the optimism from his evaluation. “There are some indicators that see things are turning around,” he said.
Duarte added that about 70 percent of the county’s taxable properties are bumping up against their SEVs. When the taxable value of a property meets its SEV, state law says that property’s tax can’t rise.
Duarte also told commissioners that the county is well below its legal debt limit at just 2 percent of the total SEV. The county’s debt load is $511 million, but only $467 million of that counts for state purposes, as $43.7 million is in revenue bonds. State law allows a county’s debt to reach 10 percent of its SEV, meaning Kent could add nearly $2 billion worth of debt and still be within the law’s parameter.
Duarte said 59 percent of the county’s debt was self-supporting and 51.4 percent of it will be paid off within 10 years.
Moody’s Investors Services and Standard & Poors recently renewed the county’s long- and short-term credit ratings at the Triple-A level and called the county’s debt load “a manageable burden.” Moody’s also changed the county’s fiscal outlook from the “negative” mark it gave last year to “stable” this year.
After receiving that news, the county completed its annual tax note sale; this year for $35.5 million. The county uses that money to buy the delinquent tax receipts from cities and townships and then collects the delinquent property taxes. Leonard Capital Markets advised the county on the sale.
One account that continues to draw interest with some commissioners is the emergency operating fund. It’s a fund with an automatic designation that has an amount equal to 10 percent of the county’s total operating budget, plus an inflation factor of slightly more than 1 percent. The fund has never been tapped because it has been set aside for a traumatic event such as a natural disaster. This year it contains $22.6 million.
Commissioner Brandon Dillon questioned why the county is saving those dollars for an event that can’t be predicted, when federal disaster funds are normally allocated to an area during such an emergency. While the money just sits there, he said county employees were losing their jobs to reduce expenses so the budget can be balanced. Dillon felt that situation constituted a local emergency.
But Commissioner Dean Agee countered that local governments do need to spend money to recover from a disaster, such as the oil spill that has contaminated the water and beaches of Gulf Coast towns in Louisiana, even when federal dollars are received. Agee said he saw a “lot of wisdom” in keeping the emergency operating fund as it is.
Something that all county officials appreciated was the outcome of the 2009 general operating budget, which finished with a surplus of $767,000.
“I think it’s worth noting that our actual for 2009 was positive,” said Agee. “I think it’s the first time since 2001,” added Duarte.
SEV, taxable value 2005-2010
SEV, taxable value 2005-2010
Here is the State Equalized Value and taxable value, along with the change from the previous year, for a real and personal property in Kent County for the last six years.
State Annual County Annual
Source: Kent County, 2010 Financial Overview, May 2010