"...as an indication of how sluggish the market is in Guilford and Forsyth counties, the average foreclosed home is currently assessed at $118,807 for tax purposes, but is selling at auction for $88,746. That’s a markdown of 33.9 percent.
...Across the state, North Carolina saw a steady rise in foreclosures from the mid-2000s through the present, with the most dramatic increase in 2009. Last year, 67,844 people in North Carolina lost their homes to foreclosure, and the first two months of this year indicate that 2011 is on course to set a new record.
...The average house in Forsyth and Guilford counties loses $30,061 in value each time a foreclosure sale is consummated. Consider that a total of 6,497 foreclosures were filed in the two counties last year. If even one in five of those houses were saved — and sometimes people avert foreclosures through personal bankruptcy or loan modifications — that still represents a drain-off of $156.2 million in personal wealth across the region.
On average, foreclosures in the two counties involve a loss of 38 cents for every dollar of assessed tax value. Tax collectors think of this in terms of sales ratio, which is the inversion of the calculation.
The sales ratio is obtained by dividing average tax value by average sales value. Counties across the state that are revaluating property values are facing something unprecedented in recent memory. Property almost always appreciates as a rule, but now most market values are well below assessed tax valuation.
Tax Director Ben Chavis said the last time Guilford County went through a revaluation, in 2004, tax values were about 80 percent of market values. Guilford County’s sales ratio is currently 103 percent. Forsyth County’s is 105 percent.
“I’ve been in this business 27 years,” Chavis said. “You’ve never seen a county lose tax base from a real property standpoint. The tax base has always been appreciating as long as I’ve been in this business.”
Guilford County has witnessed 21,871 foreclosures since its last tax revaluation in 2004 and will revaluate next year. Forsyth County, which is on a four-year schedule, has seen 3,025 foreclosures since it last revaluated in 2009.
Local governments are already feeling the affects of the housing depression on revenue. The city of Greensboro is anticipating 0 percent growth in property tax base in the next fiscal year.
During a recent community budget meeting, Starmount Forest resident Bob Skenes told Greensboro City Manager Rashad Young what he already knew.
“Next year’s going to be worst than you think,” Skenes said.
...A shrinking tax base has obvious implications.
“Carteret County down on the coast lost $4 billion of their real estate base,” Forsyth County Tax Director Pete Rodda said. “They went from $18 billion to $14 billion. You know they’re going to have to make some pretty substantial adjustments.”
County and municipal governments that end up with a shrunken tax base will have to choose between accepting reduced revenues and defunding services or raising their tax rates to maintain neutral revenue.
“Any conversation that begins with ‘tax increase’ is going to be a hard one to have,” Young said. “If that’s the option on the table, then we’re going to have to have a tough conversation.”
Raising the tax rate, even if the actual amount of the bill remains roughly the same, won’t be politically palatable. Yet elected officials might find that they have equally difficult time selling the public on cuts to public safety, summer recreational programs, street maintenance and financing for new libraries and parks.
Shrinking public budgets might be part of a new normal involving an interlocking malaise of high unemployment, halting private investment and depressed home values.
“I think it’s just going to be another challenge for us,” Young said. “We haven’t seen valuations grow as a result of new development and new tax base. We’re projecting zero growth. It’s really going to be difficult for us in an already unpleasant and challenging time.”