Skip to comments.
Paying the way with property
Cash-strapped cities eye more taxes, fees on real estate
CBS Market Watch ^
| 10-31-03
| Steve Kerch
Posted on 11/01/2003 7:39:47 AM PST by SheLion
SAN FRANCISCO (CBS.MW) -- Budget crunches at all levels of government are likely to come home to
roost on real estate owners and homebuyers as municipalities are forced to raise property taxes and
boost fees on home construction, experts argue.
"We are so pressed at state and local levels for money ... that it is going to
be tougher for cities and counties and other local units of government to meet budgets," said Maureen McAvey, a
senior resident fellow at the Urban Land Institute, a Washington land-use education and research organization.
In high-growth areas, the squeeze will not be as pronounced, McAvey said, because new development will
naturally raise the tax base. But in most areas, harder and more potentially divisive decisions will have to be
made, she said.
"Sales taxes and sin taxes have really raised a lot of revenue and helped hold off on increases elsewhere. But in
most place those taxed have reached their upper limit," said Ellen Marshall, a vice president at Patuxent
Consulting Group in Washington.
"That's going to put pressure on property taxes in the next few years," Marshall told a session of the Urban Land
Institute here this week.
In their search for money to replace federal and state cutbacks, local governments may also turn increasingly to
higher impact fees -- charges levied on developers and homebuilders -- and to additional taxes on services like
real estate and mortgage brokerage.
Those two moves could add the cost of buying or selling a home, and would likely drive up the cost of new
housing, a panel of realty experts agreed.
"If these budget deficits continue, I see more and more impact fees coming," said J. Ronald Terwilliger, national
managing partner in Atlanta for development firm Trammel Crow.
Fees expand -- and explode
Already in states like California, fees run as high as $30,000 per developed unit, Terwilliger said, on top of land
costs of about the same amount. "It makes it pretty hard to develop any affordable multifamily housing starting
from that base," he said.
Terwilliger pointed to other places where real estate has been targeted to produce more revenue: New Jersey has
boosted its realty transfer tax, paid when a house changes hands, by 50 percent; property assessments in
Virginia have risen double digits for the last several years, boosting taxes; Raleigh, N.C., has added a $1,000 per
unit school fee; and in southern Florida builders must now pay a "concurrency" fee of $10,000 per multifamily
unit, along with a $16,000 water and sewer fee.
"We're seeing a lot of different, creative uses of these fees. And we're just at the beginning," he said. "Those fees
either increase the cost of what you build or detract from the income you can earn."
Nicholas Pappas, president of homebuilder K. Hovnanian Companies of California, (HOV: news, chart, profile)
said impact fees in his state have tripled in the last decade, from about $10,000 per home to $30,000 or more.
"These are not seen as a tax, so they don't hit the radar screen of tax increases. They are buried in the one-time
cost of housing or the square footage rent of a commercial property, but they are not a matter that become a
political hot button at all," Pappas said.
"The problem is that once they are established, they never seem to go away, even if the impact [they were
designed for] changes."
Real estate bears the brunt
The reliance on real estate to fund local government is nothing new; already, 70 cents of every dollar of local tax
revenue is derived from real estate, said Jeffrey DeBoer, president of The Real Estate Roundtable, a Washington
lobbying group.
But that dependence can have unintended consequences, McAvey pointed out. Because sales taxes have
become so coveted, "every little municipality pushes for its own strip malls and mini-centers to get whatever sales
tax they can," she said.
"You go out and look and all these centers are just two-thirds full two years after they were built because there's
so much retail out there."
Unlike the federal government, states and local authorities generally must present balanced budgets ever year,
returning money in the surplus times but forced to make cuts when times are tough.
For many, property taxes have been the savior in the downturn of the last three years because housing has been
the one area of the economy that has percolated, sending home prices -- and thus property-tax revenues --
higher.
Those in real estate say only overall economic growth that includes new corporate hiring can lessen the
dependence on property fees.
"Hopefully the good news on the gross domestic product, and then on jobs, will help," Terwilliger said.
Steve Kerch is the real estate editor of CBS.MarketWatch.com in Chicago.
TOPICS: Culture/Society; Government; US: California
KEYWORDS: government; lawmakers; michaeldobbs; propertytaxes; pufflist; sintaxes; target
Navigation: use the links below to view more comments.
first previous 1-20, 21-40, 41-55 last
To: Chad Fairbanks
There is some wasteful spending, but most of it is because of federal and state mandates. The locals have little option when it comes to the wasteful part. I guess some would consider sports "waste", but I don't. Other than that, there isn't a lot of waste to cut- its all mandated from above.
41
posted on
11/01/2003 9:08:51 AM PST
by
Ahban
To: gitmo
You are talking about a different situation than I am. I am not talking about raising everyone's taxes, just getting developers to "front" the money that the district will eventually get anyway. This is due to the lag between when a new house is built and when the school can actually use the money (about 3 years).
I am talking about a high growth area, you are thinking about a situation where growth is near zero. The cost per person will not go down when enough persons come in that a new facility (that will last 30 years) has to be constructed. That will cause a temporary cash-flow problem, even when costs per person, over 30 years, do go down.
42
posted on
11/01/2003 9:15:21 AM PST
by
Ahban
To: NormsRevenge
"..We are become serfs and slaves ..."Get back to work. There's plenty of daylight left.
43
posted on
11/01/2003 9:16:08 AM PST
by
Leisler
To: metesky
I've got 104 students, with one new move in per week. I teach six sections. There are some support personel like librarians.
The overall ratio is much lower because of the feds and their mandates for special-ed, counselors, therapists, and the like. That brings the ratio down to 6.5-8.5 staff per student. The 8.5 per student is for districts that pack 150+ kids into one teacher's class. They pay their teachers more for that, so it all balances out, but is too impersonal for my tastes.
44
posted on
11/01/2003 9:20:28 AM PST
by
Ahban
To: rollo tomasi
It sounds like your situation is different from my state. You say you are spending $6,000 less than the state schools. We are lucky to get $6K period. Since it gets cold in the Winter, they need buildings to meet in.
I have taught at a private school too. The public school I teach at (Mayberry RFD type small town) does a better job of educating.
45
posted on
11/01/2003 9:24:05 AM PST
by
Ahban
To: Leisler
Your A and C may deserve a response.
Its three years because the first year in the new family assess, but does not pay. At the end of the second year, they pay for the previous year. The state gets the money and then eventually sends it down to the locals. The locals then can begin construction on new classrooms (for example).
I have heard of bonds, but I don't like government going into debt (a promise to tax in the future) any more than I like taxes. As long as the families are going to the bank for a loan on the home anyway, why not front the property taxes for the first few years on new constrution? That way, the school can save on the costs of the bond issue, where the bankers and brokers get fat. There is some fat we can cut right there.
Note I am only suggesting this for areas where there is high growth and a long delay in collection. Except for who carries the interest, it is not a tax increase. For three years that family pays no property tax. Heck, I wish there was a window where after a set period you paid no more propery tax for as long as you owned the property, maybe 7-10 years.
46
posted on
11/01/2003 9:31:18 AM PST
by
Ahban
To: SheLion
I could watch that all day.
+ happy sigh +
Well done California!
But oh boy do you have a mess to clean up. My sympathies.
47
posted on
11/01/2003 9:36:30 AM PST
by
Harmless Teddy Bear
(No matter how subtle the wizard, a knife between the shoulder blades will seriously cramp his style)
To: Ahban
So you have around 18 students per section?
What do you teach?
48
posted on
11/01/2003 9:37:29 AM PST
by
metesky
("Brethren, leave us go amongst them." Rev. Capt. Samuel Johnston Clayton - Ward Bond- The Searchers)
To: SheLion
Sales taxes and sin taxes have really raised a lot of revenue and helped hold off on increases elsewhere. But in most place those taxed have reached their upper limit," said Ellen Marshall, a vice president at Patuxent Consulting Group in Washington.Have they never heard of the "CUT WASTE CONCEPT."
49
posted on
11/01/2003 9:43:21 AM PST
by
Great Dane
(You can smoke just about everywhere in Denmark.)
To: Chad Fairbanks
and personally I'm not as inclined to stand up and say anythingI tend to agree, personally......... I will have a quiet little snicker.
50
posted on
11/01/2003 9:45:32 AM PST
by
Great Dane
(You can smoke just about everywhere in Denmark.)
To: metesky
Science, 8th grade
51
posted on
11/01/2003 10:00:17 AM PST
by
Ahban
To: Ahban
I am talking about a high growth area, you are thinking about a situation where growth is near zero. The cost per person will not go down when enough persons come in that a new facility (that will last 30 years) has to be constructed. That will cause a temporary cash-flow problem, even when costs per person, over 30 years, do go down.
I live in a high growth city. Charlotte has been growing rapidly for many years. For some reason, taxes do too. I think they should go down as the population increases.
I am not talking about raising everyone's taxes, just getting developers to "front" the money that the district will eventually get anyway. This is due to the lag between when a new house is built and when the school can actually use the money (about 3 years). "
The developer is already risking a large amount of his own capital and is being taxed and regulated heavily. To force them to fund the county's growth in anticipation of population growth is unreasonable.
52
posted on
11/01/2003 10:26:11 AM PST
by
gitmo
(Hypocrite: Someone who dare aspire to a higher standard than he is living.)
To: Great Dane
Have they never heard of the "CUT WASTE CONCEPT." There's a lot of PORK they could cut here in MAINE, I know!!
53
posted on
11/01/2003 11:32:52 AM PST
by
SheLion
(Curiosity killed the cat BUT satisfaction brought her back!!!)
To: gitmo
By what standard are you claiming it is "unreasonable"? To people who have lived in a small town all of their lives facing an influx of newcomers that might overwhelm government services it might seem very reasonable that the developers who stand to make the profits also bear the costs.
Of course, I did not even say make the developers pay it. I want to add it on to the buyer's loan amount, in exchange for them paying no property taxes the first 3 years. It is more of a way to adjust cash-flow than a long term increase in tax revenue.
54
posted on
11/01/2003 11:48:38 AM PST
by
Ahban
To: NormsRevenge
Ditto to every word in your post #37.
55
posted on
11/01/2003 2:08:05 PM PST
by
Mears
Navigation: use the links below to view more comments.
first previous 1-20, 21-40, 41-55 last
Disclaimer:
Opinions posted on Free Republic are those of the individual
posters and do not necessarily represent the opinion of Free Republic or its
management. All materials posted herein are protected by copyright law and the
exemption for fair use of copyrighted works.
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson