More than a year ago, I predicted on this blog that the impending end of the real estate bubble would portend fiscal problems for local governments, especially those in Northern Virginia, which have relied upon soaring property assessments to fund their massive spending increases. Not to toot my own horn, but I was right about the real estate bubble, and now, it appears, I was right about the fiscal distress.
The headline on Annie Gowan’s story in the Washington Post this morning: “Cuts in Spending, Increase in Taxes Considered to Offset Revenue Drop-Offs.” According to Gowan, Arlington County faces a $20 million shortfall next year, while Alexandria will take a $18 million hit. Loudoun County, which saw a 28 percent growth in property assessments last year, is anticipating an outright decline in 2008. Fairfax County is already trimming personnel expenses this year in expectation of a modest three percent revenue increase next year.
In my real estate jeremiads, I predicted one additional effect from the bursting of the market bubble: A surge in anti-tax sentiment. The budget cuts and tax hikes are only anticipated right now — they haven’t taken place yet. The screaming won’t begin until next spring when localities begin working on their fiscal 2008 budgets. That’s when the public will focus on just how much local government spending has surged since the recession – far outpacing inflation and population growth. The agitation will only increase when the tax hikes actually go into effect that summer.
That’s right about the time that Gov. Timothy M. Kaine thinks voters will be itching to chastise the low-tax partisans in the House of Delegates for failing to embrace his $1 billion-a-year taxes-for-transportation proposal. Somehow, I just don’t think it’s going to happen. Indeed, depending on how much taxes increase in NoVa, low-tax advocates could gain ground in the 2007 elections.
