Could it be less than zero
While a low inflation figure may be beneficial for business owners and consumers, it can create havoc for government officials who rely on property taxes for their main source of revenue.
Inflation has been negative nationwide since March. Should that trend continue, Kent County Equalization Director Matt Woolford said, there wouldn’t be an increase in next year’s property-tax base, if inflation is zero or less than zero.
At the same time, Woolford said he expects the State Equalized Value to fall by roughly 5 percent this year on at least half the parcels in the county. A falling SEV brings a property closer to its taxable value, and when the two meet, the tax on that parcel can’t be raised.
“We don’t have all the data in yet, but we expect that next month,” said Woolford.
Property taxes fund most of the county’s general operating fund, which covers the costs of most county services. County Fiscal Services Director Robert White said the county has normally received around $100 million in property-tax revenue each year. But for 2010 he sees that figure topping out at $96 million, digging a $4 million revenue hole, and there isn’t enough new tax-paying commercial or residential construction going on in the county to fill it.
“You are at the mercy of CPI increases and new construction,” White told members of the county Finance Committee last week.
State law limits increases to the property-tax base to the Consumer Price Index or 5 percent, whichever is lower. Despite the housing-market crisis that sent SEVs tumbling down last year, taxable values and tax bills rose because inflation was an unusually high 4.4 percent last year.
Woolford reported in April that the county’s equalized value dropped by 2 percent — its second dip in two years, but the taxable value went up by a third of 1 percent.
“We won’t have that 0.34 percent in 2010. But I don’t know where it will be,” he said.
Woolford isn’t certain because he is following a moving target. In May, it looked like the taxable value in the county would drop by 2 percent. But in August, it appeared the fall will be twice as deep to 4 percent.
“We follow the market; we don’t predict it,” he said.
County Administrator and Controller Daryl Delabbio unveiled a new budgeting process for the general fund in July because roughly $15 million has to be cut from the spending plan that stands at $169 million right now for 2010.
Woolford said he hasn’t heard from any of his colleagues that inflation will rise in the next few years, so it could be a while before tax bills start going up again. But he did say he doesn’t see the SEV growing through 2013.
“We may begin to climb the hill again; we may not,” he said. “If we have a market increase less than the CPI, then there is no gain.”
The county’s new Human Services Complex, though, may make a few gains this week, as commissioners may buy four parcels near the building at 121 Franklin St. SE. The cost for the four is $96,625. The Finance Committee approved the transaction last week and the full board will take it up this week.