The summer sequel season is upon us. Not movies, money.
Two years ago, local governments wrestled with state Legislature-imposed spending caps. In 2008, there was the onset of new property tax exemptions amid flat-lined growth and multimillion-dollar cuts to the county budget. This year, the recession and falling property values has Pasco County searching for up to $30 million worth of spending cuts and/or new revenue.
Already library services are cut, parks are charging new fees, recreation centers are closed on Sundays. Get used to it. A $30 million hole means mean service cuts, layoffs and higher property tax bills. Now, here's the scary part. There will be yet another sequel in the summer of 2010.
County budget director Mike Nurrenbrock flashed that preview to commissioners five days ago amid a Power Point filled with forlorn numbers.
Foreclosure filings in Pasco County are on pace to reach 10,000 cases this year, a fivefold increase since 2006. New construction is just a quarter of what it was two years ago contributing to an unemployment rate above the state and national averages. Declining property values and new exemptions account for a $9 billion decrease in the tax rolls, or the equivalent of all that had been gained by new construction over the past nine years.
Other department heads are just as gloomy. The county's five-year capital improvement program is going to be close to $200 million short, an increase in utility rates is likely, and homegrown employment remains elusive. The number of people who leave Pasco every day to work elsewhere continues to grow, reaching 90,000 people, a 50 percent jump since the 2000 census.
Nurrenbrock also laid the groundwork for his bosses to consider a property tax increase to the rollback rate — the amount needed to raise the same revenue as the current year. Traditionally, that tax rate is a reduction from the previous year. In 2009-10, it will be an increase because of the drop in value of the property rolls. He even provided political cover for commissioners, two of whom face voters in 2010. They won't have to advertise the rate as a tax increase and, if they do bump the tax rate to 6.7 mills, it will still be the lower than the millage charged every year since 1995 except for this year.
Then the kicker, presuming an additional 10 percent decline in property values this year and a 6 percent increase in costs in 2010, the county is again looking at a $30 million shortfall next summer.
That 6 percent figure isn't unrealistic, Nurrenbrock cautioned, because of expense increases beyond the county's control: pension payments, health insurance, fuel and energy costs. And real estate values falling another 10 percent?
"That number might be pretty accurate,'' said Property Appraiser Mike Wells.
Commercial and non-residential property values will continue to fall. As indicators, Wells pointed to the empty store fronts in strip centers, a shuttered cement factory south of Dade City and, here's one you probably hadn't thought of, self-storage units. In normal circumstances, storage unit business might have a 2 to 3 percent vacancy rate, but now those numbers might be 10 times that high.
A spot check confirmed the trend. The owner of one location in Hudson with 240 units said typically his vacancy rate is less than 1 percent, but he won't even calculate the number now, saying it was too depressing. Another said her 502 units usually run 95 percent full, but the number is down to 85 percent.
Families cutting expenses decide a storage unit is a luxury they can no longer afford and either dump the contents or store them in their garages at home. Likewise, sole proprietors and tradesmen have given up their spaces as their businesses declined or folded.
Sadly, business is booming for auction companies disposing of property abandoned in storage units, the Associated Press reported last month.
If you're looking for something upbeat, here are two items that might help you stomach the coming sequels. Wells said he believes the continued fall of property values will be exclusive of residential. Those prices will hit bottom in 2009, he predicted. And one storage business reported flat numbers for the 2009, meaning the decline of the occupancy rate had ended.
It's not much, but it's a start. For every unit being emptied, at least there is a new customer willing to fill it.