Assessments and the tax revolt of 2010

By Dave Anderson:

Allegheny County's politics have been thrown into a tizzy this afternoon.  Judge Wettick has ordered a four year rolling reassessment for the entire county as the base year system produces highly inequitable results.  Re-assessments are the local political career killer and everyone in the regional political system on both sides of the aisle have been trying to duck this problem for at least the past half generation.  

The political hand grenade that is the reassessment battle in Allegheny County is a microcosm of the political fights that are and will be breaking out across the country.  2010 looks like a year of tax revolts as the incentives of pain and local balanced budget requirements will lead to a nasty brawl as the electorate which is significantly older and more likely to own property and resources will vote first to cut someone else's services or protect a tax break than to ride out the storm. 

In 2007, I thought the mechanics of a tax revolt were in place for 2010, and it is looking more likely as the pain is even more widespread than I projected then:

as long as we stay within a mindset of zero-sum gamesmanship, reactionary and exclusionary politics is a much stronger hand to play as it is easier to assemble a narrow coalition to protect fixed slices of the pie. And as an intermediate term strategy this is a good way to reap a tax revolt within the next couple of years as the politics of pain will be too strong and the pallative of short term relief will be tempting; thus the symptoms of the underlying problems of short term pervese incentives, decreasing cutting edge productivity, loose credit and perpetual debt will be addresse without actually changing the actual structure of these trends....

People who are stuck with mortgages and houses that they can not sell, refinance or service will be looking for help. They will be looking for refinancing deals, special breaks, holds on foreclosures, delays on credit reporting, and most significantly at the local level, assistance on minimizing the quasi-fixed costs.... and most importantly, constant and downwardly revising re-assessments without concurrent increases in millage rates......

People want to make that pain go away without the costs of fixing the greater problems, and engaging in a local government financial death spiral and micro-local education arbitage seems like a decent short term fix, so we'll see a full scale tax revolt in 2010 or no later than 2012 as the last round of housing bubble junk Option ARM mortgage resets will be hitting in 2010/2011 --- what we are seeing now is just the tip of the iceberg....

The county government has every incentive to foot drag their assessments and use every possible comparable sale from 2006, 2007, and 2008 before the bubble began to deflate locally or nationally.  Property owners will want their reassessments to be done as quickly as possible using comps from this week or even projected values from sales next month as prices will probably be a tad lower tomorrow than today.  Lower projected values for tax purposes frees up individual cash flow if millage rates stay the same.

The tax revolt will occur when local taxing bodies see a marked decrease in taxable value in their jurisdiction and attempt to make up for some of the revenue loss by increasing millage rates.  At that point the Tea Party contingent has a ready made issue to glom their organizational capacity onto.  And we local government system failure.