No man is an island and neither is the effect that a sluggish real estate market has on local governments and municipalities!  The problem when a real estate market is rising - everyone thinks the party will never end!  Increasing home values, new more dense zoning are dollar signs in the eyes of tax assessors and city officials!  Higher home prices translates into more taxes, and in fact so much tax that to hide the fact the persons in charge want to spend it.  Increased education budgets, new school buses, raise in pay for employees, new fire trucks, new roads, local city projects now require acquisitions of land for new schools, firehouses and police stations.  Of course the employees will need new transportation and even a new fleet of patrol cars to better serve the community!  Spending on the local and county level are based upon an ever increasing revenue for the rising price of real estate.  But what happens when this stops?  What happens if home prices fall?  Did you ever wonder that if foreclosures increase exponentially and people also stop paying property tax?  What happens then?  Layoffs and budget cuts follow a declining tax revenue.

No one is immune from city, municipalities and state government layoffs!  Essential services  like police and fire may be spared until the end, but at some point their budget are also looked over to trim the fat.  The cutting of overtime is a start in many city departments!  But it goes further, schools after school activities like bands and sports can be the first items cut out of a budget.  Cities are in a real bind that taxes have been raised, and property values and tax revenue have declined.  The bigger budgets from the boom days now have to be slashed and will now provide mediocre services for a top dollar price!

How is your city doing in a declining real estate market?  Is your city affected?  Are any budget cuts in the plan?

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