School systems and local governments now facing budget crises due to falling property taxes may find the worst is yet to come, according to an official from the Federal Reserve Bank of Atlanta.
Tom Cunningham, vice president and associate director of research for the bank, said declines in property tax revenues usually follow drops in housing prices by several years.
“That bottom hasn’t been reached yet,” he told members of the Buckhead Business Association at their meeting May 26. “It won’t be reached for three years yet. There’s going to be a real problem.”
Officials with city and county governments and school systems in metro Atlanta have watched their property tax digests, the total value of all taxable properties, plummet over the past few years.DeKalb officials expect the county’s tax digest to fall by as much as 13 percent this year. Fulton County’s tax digest is projected to fall by 8 percent, the county’s chief appraiser has said.
“Those governmental units dependent on property taxes are going to have a problem,” he said, “and it hasn’t hit yet.”
Cunningham said despite the government’s tax problem, the economy is coming out of the recession.
“The recession has ended,” he said. “We’re not in an expansion phase. We’re in a recovery phase. It would be nice if things were going faster.”
The recovery has been slow, he said, because people aren’t buying things as they have in similar situations in the past. Cunningham said recovery will require a long process.
“You’re looking at two years to repair balance sheets, then you’ve got a decade [where borrowers and businesses] don’t want to take on risk. … That decreased appetite for risk is a real impediment. It’s not a lot of fun, but it’s where we are. Right now it’s a slog.”