Truth-in-Taxation

                         Property taxes are frequrently cited as the most hated tax, partially because they are also the least understood tax.  One reason property tax is more complicated is because of the various tax entitites and their differing tax rates (as illustrated with this picture).  However, property taxes can be explained in a relatively direct and simple manner….which we have sought out to do.  

Property Tax Myth #1: Cities receive more money when home values increase    We have found through our trainings of newly elected officials that there are a number of misperceptions regarding property tax revenue during times of increasing home values.  Even among many elected officials there is this perception that cities recieve a windfall of revenue every time the homes in their community appreciate in value.  However, truth-in-taxation prevents exactly this from taking place. Instead truth-in-taxation creates a brake on revenue windfalls associated with increasing property values.

Roger Tew and I recently presented a basic outline of how truth-in-taxation works to our city officials across the Wasatch Front. You can access the presentation here: ulct-property-tax-forum3

 

Job losses worst in 5 years…

The Labor Department today has announced a net loss of 63,000 jobs in February. The job losses are not just limited to the construction industury either. Retailers cut 34,000 jobs and manufacturing employment also took a big hit. This is the largest employment loss in five years.

“Based on today’s Employment Report, if we are not in a recession, it is a darned good imitation of one,” said Kevin Giddis, managing director of fixed income at Morgan Keegan.

“I haven’t seen a job report this recessionary since the last recession,” said Jared Bernstein, an economist at the Economic Policy Institute in Washington. “This is a picture of a labor market becoming clearly infected by the contagion from the rest of the economy.”

Utah’s employment is still relatively strong, but there are some areas weakening. According to the recent Economic Report to the Governor Utah has 105,000 jobs statewide in construction. Construction jobs increased by 11% from 2006 (10,000 new jobs), however the previous year construction jobs increased by nearly 17%. Utah job growth in construction and mining is definitely slowing, but many other industries continue to remain strong.

This map represents a nice national illustration to where job growth, by county, is above or below the national average.

 

Is bond ratings for states and cities fair?

A recent article in the NY Times notes an interesting comparison between corporate bonds and municipal bonds.

States and cities rarely dishonor their debts. The bonds they sell to investors are generally tax-free and much safer than those issued by corporations. But some officials complain that ratings firms assign municipal borrowers low credit scores compared with corporations. Taxpayers ultimately pay the price, the officials say, in the form of higher fees and interest costs on public debt.

The major complaint is coming from California (who currently rated A, but claims they should be rated triple A). However, the move to reform bond ratings has already attracted the support of half a dozen state, including Washington and Oregon. Apparently the group is lobbying Moody’s for some changes to the ratings scale. I doubt anything will change, but it is an interesting issue…and might become more important if the economy worsens.

 

Recession Looms…or not

Federal Reserve Chairman Ben Bernanke and Treasury Secretary Hank Paulson both stated today that the federal cut in rates and the economic stimulus plan could keep the economy out of a recession. Esentially Bernanke and Paulson predict that the economy could be “sluggish” for the first couple months of the year, but then pick up speed later in the year. You can read the CNNMoney article here.

Of course what is the cost of this economic package to stimulate the economy? In Utah it looks like the stimulus package will take $65 million from the state education fund. Some of this loss should be offset by increased sales tax revenue (to the tune of $30 million…seems a bit optimistic to me, but maybe not). A recent SL Trib article addresses this issue here.

Bernanke’s testimony to the Committe on Banking, Housing, and Urban Affairs

 

Great Plains Drain

It seems like population growth has no end in sight for the state of Utah. However, obviously not every region of the Nation is experiencing the same growth. An interesting article in the recent Economist addresses this issue of population decreasing in the Midwest. Looking at this map you can see one of the reason why Utah’s economy is currently stronger than most of nation.

You can read the full article here: the-great-plains-drain.pdf

 

Utah’s Economy for 2008

January has been full of speculation about Utah’s economy and the economy throughout the rest of the nation. There is no question that the housing market has cooled, but there are other economic indicators in Utah that still appear optimistic. In an effort to better understand the strength of Utah’s economy Doug Macdonald prepared this handout, an assessment of a number of salient economic indicators, for Monday’s LPC meeting. The factors reviewed are:

• Wages and salaries
• Unemployment claims
• Construction employment
• Residential construction value
• Nonresidential construction value
• Long/short term yield spread
• “Misery index“
• Local sales tax

Each of these indicators is reviewed with either a red, yellow, or green light (green meaning things still look positive). You can view the pdf here: utah-eco-indicators.pdf

 

States experiencing budget shortfall

At least a dozen states are anticipating significant budget shortfalls in 2008. The biggest crisis is occurring in California where Governor Schwarzenegger has declared a fiscal emergency — after reporting a $4.6 billion revenue shortfall. Schwarzenegger recommended reducing every state program by 10%. One in interesting quote in the article comes from Iris Lav (deputy director of the Center on Budget and Policy Priorities:

“It’s amazing how sales tax revenues are tied to the housing market,” said Iris J. Lav, deputy director of the Center on Budget and Policy Priorities. “People aren’t buying construction materials, people aren’t furnishing new homes. Some states also have real estate transfer taxes.”

Doug Macdonald, ULCT economic consultant, has been saying the same thing. In fact, at our September Annual Conference Doug presented on the cycle of residential development. In this presentation Doug stated that for every $1 billion decrease in residential construction values, taxable sales in Utah could drop by 3%. Utah is not one of the handful of states that is experiencing the budget shortfall this year…but historically Utah has been a year or two behind the national curve. So what can we anticipate in 2009? The way things look right now (with national trends and a slowing local housing market) I would bet on some level of a budget shortfall for the next FY. You can read a couple of recent articles here:

• Governors seek remedies for budget shortfalls (DNews)
• States tighten belts (Wall Street Journal)

Cycles Happen — November ULCT Newsletter

 

Back to blogging…

After a few month hiatus from blogging I’m back and recommitted. I figured today is a good day to relaunch the blog since today is also the first day of our new website: ULCT website (thanks to the great work of our new friends at Utah Interactive). So what is the topic of the first blog post of 2008? Budgets and taxes, of course…

The ULCT staff has continued with tradition and have spent our winter (post municipal election years) touring the state offering training to newly elected municipal officials. One piece of the half day training seminar is a presentation offered by Roger Tew and myself. Cities still left on the training tour are:

• Price (January 19th)
• Cedar City (February 2nd)
• Salt Lake City (February 9th)

Our presentation of budgets and taxes is focused more of the overall fiscal policies of municipal government and less on the exact nuances of managing a budget. For example, we spend a large portion of the presentation addressing the policy questions related to each revenue stream utilized by local government (property tax, sales tax, and fees). If you are interested in the presentation you can access it here: Taxes presentation to Newly Elected Officials 2008

Or if you have questions please contact me at nabercrombie@ulct.org

 

End of the Week News Update

There have been some pretty unusual stories in the press this week, related to city government and municipal elected officials. I can’t help but blog about a couple of these stories. Here is a quick recap:

Monday — New Delhi Deputy Mayor S.S. Bajwa was attacked by wild monkeys…which led him to fall from his balcony and die (I’m not making this up, thank Cameron for the email): India official dies after monkey attack

Tuesday — Ogden Mayor Matthew Godfrey tackled a burglar who tried to enter his home…the 135 lb mayor received national press for his act of bravery: Boston Globe article, Deseret News article

Wednesday — I didn’t believe this story when I first heard it on NPR, but apparently this is real. Dallas Deputy Mayor Dwaine Caraway is pushing a new policy…for residents to pull their pants up.

“The No. 1 mission is very simple: pulling up your pants. That’s all we want,” Caraway says. Read the NPR story (and even better listen to the rap song ‘Pull Your Pants Up’) here: Hip-Hop Plea

Thursday — After 9 mayors in 11 years in Eagle Mountain one city councilmember is pushing for background checks of all candidates running for office. I normally would be opposed to such a policy…but in the case of Eagle Mountain this might not be such a bad idea. Should Eagle Mountain’s mayoral candidates clear background checks 

Friday – ? seems like a boring news day compared to these stories…any suggestions?

 

Best City in America for a job…Salt Lake City

According to a recent article by Forbes magazine the best city in America for a job is right here in Salt Lake City. Forbes utilized five data points to create their city ranking: unemployment rate, job growth, income growth, median household income and cost of living for full-year 2006. Forbes then measured the largest 100 metropolitan areas. Salt Lake City’s ranking was strengthened by a low unemployment rating and a high income growth ranking.

Forbes writes, “Topping the latest ranking of out Best Cities for Jobs list is Salt Lake City. The Crossroads to the West, an economy that has been predominantly driven by the mining and steel industries, has developed into a service-based city and has become a tech sector hub for digerati migrating from Silicon Valley.”

 

Best Cities for Employment

1. Salt Lake City

2. Raleigh, NC

3. Phoenix, AZ

4. Jacksonville, FL

5. Orlando, FL

You can read the full article here: Best Cities for Jobs       Interestingly there are also articles in the paper today about Proctor and Gamble building a manufacturing plant in Box Elder Co. and Ogden city is noted as one of two finalists for the relocation of the U.S. Olympic Cycling Agency.