Tax income losses from foreclosed homes affect Californians in unexpected ways – ForeclosureConnections

Tax income losses from foreclosed homes affect Californians in unexpected ways ForeclosureConnections

Beyond the shame of tens of thousands of foreclosed, abandoned, shuttered homes in East Bay, and elsewhere in the State of California, lies a second blight year upon year of property tax income that is supposed to be funding the cities, schools and other infrastructure on which Californians depend is vanishing in the shifting sands of economic drought.

For individuals, the end of the beginning of the foreclosure road is when the sheriff put them on the street the work of government officials begins then, as they make difficult budget cuts, lay off staff and otherwise bite the bullet until the foreclosed properties are back in private hands again. Some of them may find themselves personally affected by the cuts they have to recommend.

In the East Bay area alone, banks and other lenders own over 10,000 foreclosed homes, with just a pittance up for sale in these price-depressing times and a further 20,000 in the pipeline heading the same way.

"There is no question government services at all levels are going to suffer because of this," said Contra Costa County Assessor Gus Kramer. "It's just one of the trappings of the economy we're in."

You can almost feel the pain. Concord City has put off a quarter of its workforce. Antioch has shelved a quarter of its annual budget. Hayward has levied further taxes to avert redundancies. The effect will be more dispersed in schools they depend on a combination of state income sources, and this will take a while to filter through.

A representative of the California Department of Finance admits that they failed to account for the foreclosure trend when they prepared their current budget, because nobody thought about it at the time. Current thinking is that State property taxes will fall 4.1% in the current period, and another 3.1% in the following year, both up on previous estimates. The biggest driver is the fall in property prices. This April the median buyer in Bay Area paid just $370,000 compared to the 2007 peak when $665,000 was the number that applied. Elsewhere, in areas like East Contra Costa County the drop is worse and approaching 65% in some places.

Many analysts are predicting a fresh tsunami as interest rates start rising. The situation a year ago could be repeated, affecting both economy and housing market, and stretching recovery further out. Most cities will be affected to some extent meaning that the losses will be spread throughout California.

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