Bloomberg News

Cleveland, Cuyahoga Property Values May Plummet, Fed Says

December 07, 2011

(Updates with comment from mayor’s spokeswoman in seventh paragraph.)

Dec. 6 (Bloomberg) -- Declining property values in Cuyahoga County and Cleveland, its largest city, may force local governments to raise taxes or cut services after parcels are reappraised in 2012, a report by Federal Reserve Bank of Cleveland researchers said.

Falling prices suggest that property values could be as much as 45 percent lower than 2010 county estimates, according to a study issued today by Thomas J. Fitzpatrick IV and Mary Zenker. The impact on tax collections in municipalities already facing tight budgets, especially in Cleveland and its inner-ring suburbs, “could be significant,” the researchers said.

“If creative ways to make up for this lack of revenue are not found, local governments may face the undesirable choice of either raising property taxes or reducing funding for essential services,” the study said. “The dramatic fall in property values across the country will accelerate the financial distress of municipalities in the wake of the Great Recession.”

The researchers used Cleveland and Cuyahoga County in northeast Ohio as a case study. Using the sale prices of residential properties, they estimated the current market value of parcels compared with county estimates from 2006-2010. Researchers projected that property values in Cuyahoga County will be between 11 percent and 18 percent lower than 2010 estimates after next year’s reappraisal -- a $1.1 billion loss to the county tax base.

Braced for Shock

Property values may be 38 percent to 45 percent lower than county estimates in Cleveland and 26 percent to 30 percent lower in inner-ring suburbs, the report said.

“If appraisals come in close to this far below the 2010 county estimates, Cleveland and the inner-ring suburbs may face a significant tax revenue shock in 2012,” the researchers said.

Property-tax collections in Cleveland have been flat since 2009, and 7 percent of the city’s $1.2 billion operating budget comes from real estate, Andrea Taylor, spokeswoman for Mayor Frank Jackson, said in an e-mail. Most of the budget is based on income taxes, she said.

A telephone message seeking comment about the report from Wade Steen, Cuyahoga County’s fiscal officer, wasn’t immediately returned.

It’s too soon to speculate what implications the report’s conclusions might have on city or county bonds, June Gates, a spokeswoman for the Cleveland Fed, said by telephone.

--Editors: Stephen Merelman, Mark Schoifet

To contact the reporter on this story: Mark Niquette in Columbus, Ohio, at mniquette@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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