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TMCNet: Housing slump taking toll on municipalities, too

[April 21, 2008]

Housing slump taking toll on municipalities, too

(Lancaster New Era (PA) (KRT) Via Thomson Dialog NewsEdge) Apr. 17--Whenever Manor Township Manager Barry Smith goes to area municipal meetings, he hears "people talking about the slump."

And he's not talking about a baseball player who hasn't gotten rolling yet this new season.

Instead, Smith and other municipal managers and finance people here are contending with the impact the national real-estate slump is having on them.

Local communities rely on funds from the real-estate transfer tax, when a house is sold, and from such fees as those for building permits for new homes to help them balance their budgets.

And fewer new homes, and few homes being sold, means that Lancaster County's 60 municipalities have less income to help balance the budget, several area municipal managers say.

Most of the area municipal managers agree that the mortgage slump won't force them to curtail services or raise the property tax next year, but they plan to keep an eye on it.

Smith said he and township staff "try to forecast for the annual budget, but have no control over the marketplace."

"A prolonged slump may affect our decision to move forward on major expenditures," he said.

And just like rising oil prices boost how much they have to spend on gasoline for police cruisers and public-works and other municipal vehicles, the current mortgage slump puts a hurt on the municipal pocketbook.

Manor Township's income from real-estate transfer taxes went from $520,072 in 2005 to $443,610 in 2006 before increasing slightly to $453,106 last year.

Building permits for new homes plummeted from 2005 to 2006, going from 206 permits with a dollar value of just under $31 million to 128 permits worth $17.3 million.

But last year, the number rose again slightly, to 144, with a dollar value of $18.4 million.

Another manager, Charles Douts of West Hempfield Township, agrees that "you definitely can notice the difference, with less income now than a few years ago."

The difference is clearly seen in income from the real-estate transfer tax dropping by more than a fourth, from $406,068 in 2006 to $289,777 last year.

Building permit fees also were down significantly, from $107,944 in 2006 to $91,843 last year, Douts said.

And "it appears that 2008 numbers may even be less," Douts said.

As of a recent date, he said -- when West Hempfield had issued only one new home permit -- it had issued five that far into 2006 and two by that date last year.

Another impact for municipalities, Douts noted, is from the earned income tax.

While it's "too early for us to see any changes from this tax -- it seems to take longer for trends to show up -- but it is something we pay close attention to."

Another suburban township manager, Robert Krimmel of East Hempfield, said it looks like "it's not going to be a banner year for our revenues in these areas, no doubt about that."

East Hempfield's collection of realty transfer taxes is down so far this year, from $279,000 last year at this point to $230,000 in 2008.

The figures were at $967,000 in 2005, then went up 30 percent to $1.26 million in 2006 before plunging last year to $873,000.

"But we are blessed. ... We have good employment in the area," Krimmel adds. "Maybe this is the year you're thankful if you have a good job."

Warwick Township officials "are in the same boat," township Manager Dan Zimmerman said.

The figures are down, but "still, it's too early to say if that will be a significant impact."

Interest earnings also have taken a drop due to recent Federal Reserve action, and building permits also "are slow at this juncture of the year," the Warwick manager adds.

In Lancaster's most-populous suburb, Manheim Township, officials are seeing an 8- to 10-percent drop so far this year in income from the real-estate transfer tax.

The income has "fluctuated" -- up one year, down the next -- over the last several years, township finance director Dawn Stratchko said.

But the figures for the transfer tax, or the income from building permits, could always turn around with a major home transaction or commercial project, Stratchko, township Manager Jim Martin and its director of code compliance Don Forry agreed.

With real-estate transfer tax income, other suburbs aren't doing so bad, like Lancaster Township, where real-estate transfer tax collections are currently up by about $20,000 from the same time period last year, its finance officer Diana Hess said.

And somewhere in the middle is East Lampeter, the township's Manager Ralph Hutchison said.

So far in 2008, the suburban township east of Lancaster is down in real-estate tax collections from the same time in 2006, but slightly better than a year ago, its manager said.

It collected a little over $472,000 for all of 2006 and just a fraction less, $471,000, last year.

"We're watching it, and hoping it turns around."

If the number goes downward, "we'll have to adjust how we conduct the township's services for residents," he added.

To see more of the Lancaster New Era, or to subscribe to the newspaper, go to http://www.lancasteronline.com/newera.

Copyright (c) 2008, Lancaster New Era, Pa.
Distributed by McClatchy-Tribune Information Services.
For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

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