Why You Should Worry About Local Governments

Q1 Property Taxes

Photo: U.S. Census Bureau

In the latest bit of bad news for cash-strapped local governments, property tax receipts declined for the second consecutive quarter, according to new data released Tuesday by the Census Bureau.In the first quarter of this year, local governments saw a 1.7 per cent drop in property taxes revenues over the same period in 2010 — a trend likely to worsen.

“Local governments are hard pressed with lagging fiscal effects of the recession,” said Lucy Dadayan, a senior policy analyst at the Nelson A. Rockefeller Institute of Government.

Home prices continue to decline faster than local governments can raise tax rates, meaning property tax assessments are likely to continue to fall. This will further strain municipalities, Dadayan said, that in many states rely almost exclusively on property tax revenues for funding.

Overall local tax receipts were down 0.7 per cent from the same period last year, according to the Census Bureau.

State governments, on the other hand, saw a 9.3 per cent jump in overall tax revenues, mostly as a result of the economic recovery, but also due, in part, to higher tax rates, Dadayan said.

“Still, states will continue facing fiscal challenges, particularly in the absence of federal stimulus money that they relied on for the last three years,” she said.

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