Decline in local property values leads to leaner government budgets

Escalating property values used to drive Hidalgo County’s governmental budgets skyward.

But for budget officers across the region, the past two years must have felt like a sharp plummet back toward Earth.

Property values across Hidalgo County declined by 2 percent this year, capping last year where a 3.3 percent increase was seen as a drastic change from the double-digit growth of the past.

The drop in property values will mean fiscal challenges for municipalities, school districts and other taxing entities as they dive into the budgetary process this month.

Perhaps none will feel the sting more than Hidalgo County government, where commissioners must tackle a shortfall of at least $10 million.

County budget director Raul Silguero said they are learning to deal without the property value increases that used to generate $10 to $12 million a year in new revenue.

"We were using that new revenue to finance the increases that we were experiencing," Silguero said. "Now we’re going the other way."

DECLINING VALUES

The overall tax roll in Hidalgo County fell by about half a billion dollars in 2010, leading most governmental entities to see a 2 to 3 percent drop in taxable property.

Most of the decline in property values was driven by foreclosures that lowered market values for surrounding homes, said Rolando Garza, the chief appraiser for the Hidalgo County Appraisal District. In addition, new development was slow as developers scaled back because of lack of access to capital to buy property or build new homes.

The market value of residential properties this year grew by $204.5 million, driven largely by $284.2 million in new properties that were added to the rolls. But in commercial property, existing value plummeted by $441.5 million with only $24.6 million in new property values.

Appraisers revalued property in the McAllen, Mission and Sharyland areas this year as part of a cycle where they do one-third of the county each year. With the completion of this year’s process, appraisers have looked at all of the county’s property since the late 2000s recession began.

Garza said he doesn’t foresee increases in value for 2011, but there may not be as much of a decrease as this year.

TRIMMING THE FAT

Across the country, declining revenues are causing massive layoffs for local governments. The National League of Cities estimates that a fiscal crisis will force job losses of nearly 500,000 and significant cuts to services such as public safety, public health and social services.

The City of Edinburg, like other municipalities in the county, hasn’t been immune to the economic downtown, Edinburg Mayor Richard Garcia said at a budget workshop this week. But the city has fared well in comparison to other cities in the nation.

Budget writers there addressed a $2 million shortfall without increasing water or sewer rates, solid waste collection rates or its tax rate. But most new budgetary requests by city departments were not approved – although the police, fire and solid waste departments will receive new equipment and gear. No new city personnel will be added.

In McAllen, the city plans to address a $6 million shortfall by not filling a majority of new employee requests and by keeping new vacancies empty for at least four months.

The city, which has also been affected by slumping revenues from its international bridges, also plans to pull $660,000 from its reserves.

In Hidalgo County, budget director Silguero will recommend dipping into the county’s fund balance to address part of its $10 million shortfall.

Because of unexpectedly high revenues this year and reimbursement for Hurricane Dolly expenses, the county’s fund balance is projected to reach $24.4 million, a record number despite additional costs incurred this year for dealing with Hurricane Alex.

But the county will be limited in pulling from its health care insurance and worker’s compensation reserves, which it partly drained to help balance last year’s budget.

Departments will also have to cut 6 to 8 percent from last year’s already-lean balance sheets.

The county could continue to collect last year’s level of tax revenues by raising its tax rate by 2 pennies to 61 cents per $100 in property value, Silguero said.

But commissioners Joe Flores and Tito Palacios have already said they are opposed to such a hike.

Palacios wants the county to stay within its means under the existing tax rate. While that may make it difficult to continue services at current levels, he said, the county can minimize the impact by making smart adjustments.

Without new sources of revenue the county shortfall could lead officials to cut salaries or impose furloughs on employees – as some state agencies have done in the face of an $18 billion budget deficit this year, Flores said.

"We’re in a situation where the economy is causing everybody to have problems," he said. "Believe me, I wish we were in great shape. But we’ve got to do what we’ve got to do."

Jared Janes covers Hidalgo County government, Edinburg and general assignments for The Monitor. He can be reached at (956) 683-4424.