Property Tax Time Bomb

Heading down the stretch with a month and a week left to go in 2008 and I'm thinking the big story of the year won't be historic elections, perceived weaknesses in Mayor Plusquellic's political armour or even the crime blotter's sensational trials such as the Bobby Cutts, Jr. case.

2008 should be remembered as the start of America's major come-to-Jesus money moment.

In the past 90 days we've basically seen wealth in the wealthiest nation on earth take deep slices, with the market more than 40% down and confidence in our major institutions -- banking and homegrown automotive -- in the toilet. Banks won't lend to banks and Americans have clearly shown American cars are their top choice for wheels.

Today President-elect Obama unveiled his economic team, but there are still many, many questions to be answered on what to do. The existing Congress -- the same body that returns in power in 2009 -- seems impotent when it comes to forcing the outgoing Treasury Secretary to do what he said he was going to do with $700 billion dollars in bailout money. The housing bubble burst continues, banks say they aren't even sure what their complicated portfolios are really worth, charges are traded over backroom decisions that kill one institution to benefit another and the country looks divided over whether clueless Detroit CEO's (not only management but also union bosses) should be given a chance to manage their way out of this mess they've created.

But we aren't seeing the worst, yet. Just today, Ohio's Association of Realtors noted Ohio's average housing values (the total amount of residential real estate sold divided by the number of units) declined in value by 7.4% through October 2008 when compared to the same point last year. The Ohio average declined from $150,800 to $139,571. In real dollars, that amount actually declined by 19.7%, from $17 billion a year ago to $13.7 billion. OAR's member Realtors sold nearly a fifth less real estate and while that stinks for real estate agents living on a commission, it doesn't bode well for the local governments living off property taxes either.

Long-range thinkers are taking hard looks at how property taxes are figured -- an odd mix of economic formulas and the art of appraisers in determining what your house is worth. So much of government is tied to your property and this hits you whether you own or rent; after all, how do you think landlords pay their property taxes? When property values decline, those locked-in tax percentages are impacted, too. It hits schools (toss aside the talk of how its unconstitutional; the Ohio Supreme Court didn't provide a penalty for still using property taxes so the DeRolph decision remains toothless) as well as social service agencies, libraries, zoos, police, fire, ambulance and even road repairs and improvements.

Taxpayers are likely to take a dim view of appraisals that charged more in property taxes when values were going up but what about when those values are heading south -- does the County start reducing tax bills in comparison wholesale when those housing values drop just like your 401k portfolio? Government is used to adjusting up, not down, but with the value of what we own continuing to decline thanks to market conditions it can't control do tax collectors have little choice but to respond in kind?

In turn, will we see a rush to the ballot box by every agency receiving a penny of property tax revenue to help shore up those revenues? School districts have long known just how hard it is to go to the well again and again and again. ,With the property tax values of entire communities taking a hit, that whirlpool drags even more quasi-governmental groups into the swirl.