Clovis News

Valley tax revenues are increasing

Valley communities are beginning to see an uptick in property and sales tax revenues, marking what many believe is a financial turnaround for local governments -- and a sign of broader economic recovery for the region.

The growth of local tax revenues, which are the bread and butter of cities and counties, has been slow and, so far, too soft to offset rising expenses. At least one Valley economist warns that the housing market, on which property taxes are based, is years from rebounding in earnest.

But the revenue increases, which follow several years of decline, are welcome news to cities and counties. Local leaders expect that the returning taxes will help stop the bleeding of government services.

"If we weren't projecting a rebound, we probably would be having to make additional cuts," said Jamie Hughson, interim finance director for the city of Clovis, which has trimmed police, fire and parks services. "But because those numbers are beginning to come back, we'll be looking at keeping the status quo."

Sales and property taxes make up the bulk of city and county discretionary spending. They pay for the police officers on the street, the maintenance crews in parks and the elections officials at the polls. When the recession choked the stream of sales and property taxes, local services suffered.

"We started making cuts four years ago, and those cuts have continued the past three years," said Hughson. "As we see some growth on the revenue side, we should begin to stabilize."

Sales and property tax revenues, local leaders say, have a long way to go before returning to what they were. And their growth isn't projected to be enough this year or next to compensate for other financial hits that cities and counties are experiencing, such as rising costs of employee health care and retirement and cuts in state funding.

"I think the market is beginning to stabilize, but there's so much in flux with the economy and the governor's budget," said County Administrative Officer John Navarrette. "I hate to say it's getting better when I'm not sure what will happen."

Gov. Jerry Brown's budget plan, which seeks to close the state's $26.6 billion budget gap, directs local governments to take over many state programs and relies on uncertain tax proposals to help fund the expense.

In addition, protests in the Middle East have raised economic concerns at home, as fuel prices soar and state gas tax revenue hangs in the balance.

Meanwhile, increases in local tax revenues have been small.

Fresno County, for example, expects to end the budget year on June 30 with 1% more property tax revenue than the year before and 2.5% more sales tax revenue. The gains account for a few million dollars in a roughly $258 million discretionary fund.

"You have to cross your fingers and hope that the revenues will continue to grow and catch up with costs," said county Auditor-Controller Vicki Crow.

Crow expects this to be the case. She projects the county will see a roughly similar increase in tax revenues next year.

In the cities of Clovis and Fresno, sales tax revenues began to increase this budget year for the first time in three years. Property tax collections, though, remain slightly down, though both cities expect that revenues will begin increasing next year.

"The current local indicators have me cautiously optimistic," said Fresno's budget director, Renena Smith.

She is encouraged by the nearly 4% bump projected in this year's sales tax revenue, which factors heavily into the city's budget because of Fresno's many shops and restaurants.

"People are not as worried now. They're not hanging on to their money as much. They're starting to spend it. This is what leads to economic recovery," Smith said. "Hopefully, we can soon start building back our core services."

Tulare County leaders also are seeing sales and property tax revenues level out and begin to grow after years of decline.

"Hopefully, this is the start of returning to normal," said Martin Meier, deputy county administrative officer for Tulare County.

Normal, though, still may be several years away. Few expect tax revenues to increase as quickly as they did during the housing boom and when consumer spending soared earlier in the past decade.

"We've seen 8 to 10% property value increases on a year-to-year basis [during the height of the housing boom]. Now we're looking at 2 to 3%," said Paul McIntosh, executive director of the California State Association of Counties. "Hopefully the increases will be positive year over year."

Jeff Michael, director of the Business Forecasting Center at the University of the Pacific, said recovery of the Valley's housing market may be further off than some think.

Property tax revenues, which lag behind market trends, may not fully rebound until later this decade, he said.

"In some areas of the Valley, it's not clear that you've seen the bottom of [the] price decline," he said. "I think we'll still be talking about recovery in five years. There's a lot of damage to repair."

In Fresno County, the property tax roll -- the assessed value of all property for tax purposes -- was down slightly this budget year, after a much bigger decline the previous year. The county, however, collected more taxes as fewer residents were delinquent on their bills and penalties from prior years were paid.

Next year, the county's property tax roll is expected to increase slightly, and county officials are optimistic the trend will continue.

Some properties may lose value, they acknowledge, and get assessed at lower rates, but most overvalued property has already been reassessed. The construction of new homes and offices, they believe, will outweigh future losses on the tax roll.