Foreclosure homes - Foreclosures Impacting On City and County Budgets

The telltale signs of foreclosure slaps are everywhere – lesser books in San Jose libraries, overgrown city parks, untrimmed tress on Santa Clara County commons and you name it. There is not money coming into the kitty of the local authorities. State budgets too are under pressure. With home values going down and lesser number of sales from where will the taxes come?

San Jose Budget Director, Larry Lisenbee just does not know what to do – from where to get funds for the action zone. This year there has been an 18% decline on sale of houses in the county and consequently a fall in transfer taxes and its related finances. Lisenbee’s calculations in supplemental tax revenues for the year is short by 5%. Supplemental property tax is imposed when a property exchanges hands to make up for the difference between assessment valuations from date of original purchase to present purchase.

The Budget Director for Santa Clara County, Leslie Crowell complains that she is facing a 9% decline for the next year fiscal budget that starts from 1^st July 2008. The combined value of the property gone into foreclosure in Santa Clara County is enormous.

The second and third quarter of this year saw property worth about $506 million being foreclosed in California. During the same period in 2006 the property valuation of foreclosed units was $78 million – marking 549% rise.

While foreclosures are on the rise the number of houses being sold are slowing down. Only 181 houses have been sold this year from auctions held in courtrooms. The lenders, mainly the banks, repossessed the others.

On an average the bank’s opening price at the auctions was $91,000 less than what the previous foreclosed owner had paid to purchase it. But even with these huge discounts there were few takers of the offer.

The assessor of the county begins to reassess the value by the current yardstick once it is taken over by the banks or lenders. Invariably the value is less than the previous one and consequently the tax is also much lower than the previous figure. The tax that is thus collected is spent on various heads – 45% being allocated to schools, 18% to county government, 14% to cities, 10% to redevelopment groups, 7% to colleges and special districts are given 6%. Each slot is going to suffer.