Foreclosures drain cash from counties
BY STEVE NEAVLING • FREE PRESS STAFF WRITER • October 16, 2008
The growing mortgage crisis is costing Wayne, Oakland and Macomb counties a combined $34 million next year in tax revenue and forcing officials to trim money for police officers, firefighters, libraries, parks, health agencies and services for seniors and lower-income families.
Next year's estimated 5% drop in property values across metro Detroit -- the largest in decades -- also is likely to eat away more than $9 million in revenue for Wayne, Oakland and Macomb's three community colleges and $2 million for the SMART suburban bus system.
Foreclosures and sluggish home sales are dragging down real estate values, and hence, the property taxes that are governments' core source of revenue.
Add to that high fuel and health care costs, rising unemployment rates, cuts in state funding and the abrupt collapse of financial markets, and local governments are facing one of their worst crises in decades.
"We're getting killed on the revenue stream, and there's almost nothing we can do about it," said Macomb County Commissioner Andrey Duzyj, D-Warren. "It's a huge problem."
Macomb County is facing its worst fiscal hardship in at least four decades, as officials grapple with a projected record $34-million deficit next year and a $44 million shortfall in 2010. The main culprit is a combined projected $14-million loss in property taxes during the next two years.
To shrink the budget hole, the county is releasing jail inmates early, and this year, slashed recreation programs, removed books at its library and increased service fees. Officials are expected to resort to massive layoffs, cuts in sheriff's deputies and a reduction in salaries and benefits for county employees by next month.
In Wayne County, up to 160 sheriff's deputies received layoff notices this month to help offset a projected $15-million loss. All departments also were forced to cut 10% from their budgets.
Property values in Oakland County are to drop for the first time in 40 years next year, forcing officials to eliminate 152 jobs through early retirement and to close a sheriff's boot camp for nonviolent offenders.
"When property values are bottoming out like they are now, it makes it very difficult to balance a budget," said Tom Hickson, director of legislative affairs for the Michigan Association of Counties. "With the lack of revenue coming in, we are getting to the point where counties may have to cut services that are mandated by the state."
Sliding property values also are cutting sharply into revenues for cities and townships. In Warren, for example, officials expect a $4-million loss in tax revenues next year. That may mean fewer police and firefighters, and a more difficult time serving the growing senior population, city officials said.
"Property values are going to continue to decrease as the economy spirals out of control," Warren Mayor Jim Fouts said. "It's going to be a very, very difficult time for governments."
And on the state level, officials expect to lose tens of millions of dollars in property tax revenue next year to fund schools.
Budget planners fear the mortgage crisis will continue for several years until the economy rebounds and foreclosures decline.
Officials in Oakland and Macomb counties are bracing for record foreclosures this year, with a combined 18,000 families expected to lose their homes. Wayne County couldn't provide an estimate, but officials said foreclosures could easily exceed 20,000.
"When you have a glut of houses that no one is buying, prices go down," Deputy Oakland County Executive Robert Daddow said. "It's hurting everyone."
BY STEVE NEAVLING • FREE PRESS STAFF WRITER • October 16, 2008
The growing mortgage crisis is costing Wayne, Oakland and Macomb counties a combined $34 million next year in tax revenue and forcing officials to trim money for police officers, firefighters, libraries, parks, health agencies and services for seniors and lower-income families.
Next year's estimated 5% drop in property values across metro Detroit -- the largest in decades -- also is likely to eat away more than $9 million in revenue for Wayne, Oakland and Macomb's three community colleges and $2 million for the SMART suburban bus system.
Foreclosures and sluggish home sales are dragging down real estate values, and hence, the property taxes that are governments' core source of revenue.
Add to that high fuel and health care costs, rising unemployment rates, cuts in state funding and the abrupt collapse of financial markets, and local governments are facing one of their worst crises in decades.
"We're getting killed on the revenue stream, and there's almost nothing we can do about it," said Macomb County Commissioner Andrey Duzyj, D-Warren. "It's a huge problem."
Macomb County is facing its worst fiscal hardship in at least four decades, as officials grapple with a projected record $34-million deficit next year and a $44 million shortfall in 2010. The main culprit is a combined projected $14-million loss in property taxes during the next two years.
To shrink the budget hole, the county is releasing jail inmates early, and this year, slashed recreation programs, removed books at its library and increased service fees. Officials are expected to resort to massive layoffs, cuts in sheriff's deputies and a reduction in salaries and benefits for county employees by next month.
In Wayne County, up to 160 sheriff's deputies received layoff notices this month to help offset a projected $15-million loss. All departments also were forced to cut 10% from their budgets.
Property values in Oakland County are to drop for the first time in 40 years next year, forcing officials to eliminate 152 jobs through early retirement and to close a sheriff's boot camp for nonviolent offenders.
"When property values are bottoming out like they are now, it makes it very difficult to balance a budget," said Tom Hickson, director of legislative affairs for the Michigan Association of Counties. "With the lack of revenue coming in, we are getting to the point where counties may have to cut services that are mandated by the state."
Sliding property values also are cutting sharply into revenues for cities and townships. In Warren, for example, officials expect a $4-million loss in tax revenues next year. That may mean fewer police and firefighters, and a more difficult time serving the growing senior population, city officials said.
"Property values are going to continue to decrease as the economy spirals out of control," Warren Mayor Jim Fouts said. "It's going to be a very, very difficult time for governments."
And on the state level, officials expect to lose tens of millions of dollars in property tax revenue next year to fund schools.
Budget planners fear the mortgage crisis will continue for several years until the economy rebounds and foreclosures decline.
Officials in Oakland and Macomb counties are bracing for record foreclosures this year, with a combined 18,000 families expected to lose their homes. Wayne County couldn't provide an estimate, but officials said foreclosures could easily exceed 20,000.
"When you have a glut of houses that no one is buying, prices go down," Deputy Oakland County Executive Robert Daddow said. "It's hurting everyone."
