Wednesday, November 4, 2009
While the story is starting to gain traction, the plight of municipal budgets remains woefully underreported. Maybe its the fact that the federal and state governments are so stimulus-happy that some just assume that cities and counties would be enjoying the easy money party, too.
That would be an incorrect assumption, though. In fact, municipal budgets are caught in a real fix--declining revenues on one hand (less sales tax, less property tax, and less income tax lead the way) with increasing expenses on the other (underfunded pensions and health care plans win the gold and silver medals in this area).
Several cities, such as Vallejo, California and Prichard, Alabama have gone so far as to declare bankruptcy. In some states, though, that's not a legally-permissible option.
Which leads to a question very pertinent to this blog: how will the dire fiscal straits of municipal governments affect land use?
One thought is that jurisdictions will try to raise fees to make things like inspections and engineering reviews more revenue self-sufficient. However, with development falling off a cliff over the last 18 months, raising fees won't help much since there aren't many developers paying fees in the first place (if you need a good anecdote to show this, check out recent planning commission agendas where you live and note how they compare to pre-2008 meetings).
Well, this recent story provides some interesting background on the ongoing municipal crisis that includes a note about how land use and development could play an interesting role as the drama further unfolds:
Without bankruptcy protection, a city that couldn’t pay bondholders would be forced to raise taxes until it could. This happened to West Palm Beach, Florida in the Depression and property tax rates rose to 42.5 percent of assessed value. Potentially bondholders might demand that the city hand over real estate to satisfy its debts.
--Chad Emerson, Faulkner U.