Foreclosures and the subsequent decrease in overall property values could lead to budget problems for some Colorado counties.Dropping property values – a major source of county funding – are compounding other budget woes that include a decrease in sales tax and the rising cost of energy, said officials from across the state.
Chip Taylor, legislative director of Colorado Counties, said foreclosures will have widely varying effects on different counties based on how much residential property they’re home to, how reliant each county’s budget is on property tax and what the rate of foreclosures is in different areas and neighborhoods across the state.
With a glut of properties on the market, homes begin selling for less, affecting the property tax assessments on all similar homes in a neighborhood.
Counties reassess property values every two years. Most property owners are currently paying taxes that correspond to a home’s worth in the first half of 2006 – well before housing became attached to the word “crisis,” said Christopher Woodruff, Weld County’s assessor.
Counties will start to see a real revenue impact in 2009 when property values are reassessed, he said.
In Adams County, where the majority of county funding comes from property taxes, a record number of foreclosures is threatening to drive down property values and in turn the level of the county’s coffers.
One in 23 Adams County homeowners experienced foreclosure in the last quarter of 2007, according to a Colorado Division of Housing report.
The county is already looking for ways to save money, said Adams County Treasurer Diane Christner, but hopes property values will increase in some areas to offset declining values in other neighborhoods.
Adams County already maintains a lean budget, county officials said, but when revenues decrease, services like fixing potholes and building bridges are delayed.
El Paso County is facing a $7.5 million budget deficit and considering cutting funding for services such as parks and snow plowing.
But the troubles in El Paso County are fairly recent and probably don’t have a direct impact on the county’s budget yet, said Public Trustee Tom Mowle.
Mark Lowderman, El Paso County assessor, said the county’s 1,800 foreclosures last year won’t have enough of an impact to bring down the $6.5 billion total value of the county’s 265,000 properties.
But El Paso County did lower its property tax rate last year to comply with the Tax Payers Bill of Rights because property values increased by 12 percent.
TABOR, an amendment to the state constitution, prohibits taxing districts such as counties and cities from collecting more than 5.5 percent of additional net revenue each year.
If El Paso County’s property value stops growing, the county will see lower revenues because of that lower tax rate, Lowderman said.
While some neighborhoods are better off than others, some counties are almost immune to foreclosures and their fiscal impacts.
Eagle County doesn’t have much to worry about when it comes to property taxes. Homes have doubled in value since 2000, said John Lewis, the county’s finance director.
Eagle County’s foreclosure rate – one home per 136 households in the last quarter of 2007 – was significantly lower than many counties on the Front Range.
“(Foreclosures) might impact some of our county revenue slightly, but so much of our revenue is based on tourist sales,” said Lewis, adding that Eagle County has the lowest property tax rate in the state, which funds less than 20 percent of the county budget.
Adding to Eagle County’s financial edge is the fact it has de-Bruced, giving the government more funds and financial flexibility than places like El Paso County. De-Brucing, sometimes called de-TABORing, can occur only when voters approve lifting TABOR’s 5.5 percent net revenue cap, keeping the tax rate the same while allowing an open-ended net revenue increase that corresponds to the rising property values.
“My personal feeling is (TABOR author Douglas) Bruce has ruined that county and that economy, and I’m a Republican,” Lewis said.