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Property taxes look like they could drop even more in 2010-11

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POSTED August 27, 2009 1:24 a.m.
The bottom line isn’t looking good for the next five years or so when it comes to municipal property taxes for Manteca and other San Joaquin Valley cities.

Manteca is in a better position than most thanks to the strong prospect of sales taxes bouncing back fairly quickly with new regional retail coming to town. Even so, that rebound may take a year or so to hit city coffers.

That’s the good news. Here’s the bad news. Property taxes won’t be coming back any time soon. Manteca is taking a 14.7 percent hit this year. That’s better than Lathrop and better than Tracy. Even so, based on budgeted numbers for the fiscal year that just ended that represents a $750,000 drop in revenue.

There is a good chance next July will bring another round of bad news for cities including Manteca when it comes to property taxes. Based on sales trends from Jan. 1, 2009 – the date state law required the reassessment for this year that reflected a 14.7 percent loss took place –values have plummeted even further.

If you take the Multiple Listing transactions, the median value has dropped $49,750 or about 22 percent for residential property since Jan. 1, 2009. The drop in the median resale value of property for Jan. 1, 2008 to Jan. 1, 2009 was $70,000 or 20 percent. The reason the property assessment that impacts taxes didn’t drop a full 20 percent in Manteca was due to commercial as well as new home constriction which was around 250 units. Assuming construction is the same or just a bit better when this year ends, Manteca could be facing another 10 to 15 percent drop in property values.

That could double the loss from $750,000 this year to $1.5 million next year. It would take one heck of a large jump in taxable sales volume to offset that. It could happen, though, but it is doubtful it will be in time to save Manteca in the 2010-11 fiscal year.

Given that it makes the current dilemma facing Manteca leaders – and municipal employee groups – even tougher. The $2.5 million deficit – assuming most of it is done through cutting employee cost since they represent 85 percent for the general fund – means there will be a sizeable gap next year as well.

The projection of another $500,000 to $750,000 loss in property taxes for Manteca next fiscal year is a broad estimate but given market conditions eight months into the year that counts for property tax reassessment on Jan. 1, 2010, it is something that needs to be kept in mind.

What this means for the city is there is no “one year bridge” when it comes to restructuring the city to balance the budget. Whatever is done now can’t be with the idea it’ll just get us to next fiscal year when we hope economic conditions will change. Even if there is an upswing in sales tax – which is quite plausible – the odds are property taxes receipts will drop even further.

This represents a major challenge for the city as it struggles to keep municipal services from fire and police protection to street maintenance and park upkeep intact as much as possible.

The deflation of property values statewide – the first time it has happened since 1933 at the height of the Great Depression - reflects a new way of doing business for cities and counties.

It means sales tax more than ever will be critical for cities to survive and thrive.

Manteca has a leg up but even so that won’t be enough to stop some serious restructuring.

Other nearby cities have reserves they can cannibalize but in all odds that will get them through just the next year. After that they have the potential to be in much worse shape than Manteca.

For now, though, Manteca’s challenge is to come up with a game plan that takes into account further revenue drops from property taxes in the next few years followed by a slow rebound.

Sales tax should be a big help for Manteca next year but no one should assume it will be enough to rig a solution that “assumes” happy days will return by July 1, 2010.
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