Monday, May 14, 2007

"Pain Has Just Begun"

From the Sacramento Bee:

So far, consumers and businesses have borne the brunt of suffering tied to the economy. But now local jurisdictions from El Dorado County to Elk Grove are starting to cope with a revenue squeeze brought on by falling home construction, lower home values and softer retail sales.

In Sacramento County, supervisors on Wednesday will face a $33 million shortfall in the new preliminary budget tied to a softening in property and sales taxes, county Chief Financial Officer Geoff Davey said Thursday.

In Elk Grove and Citrus Heights, sales tax revenues are virtually flat, with more of the same expected in the fiscal year that starts July 1. In Roseville, the rate of sales tax growth is about half what it was a year ago.

Some say that the civic side of the pain has just begun. "Really the slowdown in property tax has just started to hit the tax rolls and the budgets of our municipalities and statewide," Davey said. "A year from now, that is when you're really going to see budgetary impacts."
In Elk Grove, sales tax proceeds are flat after years of double-digit growth, said city Budget Manager Michael McGrane. For the budget year that starts July 1, he projects sales tax revenues -- the city's largest revenue source -- will grow by only 1 percent. That is far from the 16 percent to 21 percent yearly increases Elk Grove saw from 2003 through fiscal 2006.
In Sacramento County, proceeds from property taxes are expected to grow 10 percent in the fiscal year that starts July 1. That's down from 15 percent for the fiscal year now ending. "It's the largest year-to-year decline I can find in the last 25 years," Davey said. Every percentage point of growth equals $2.7 million in general fund money, he said.
From the Sacramento Business Journal:
Banks struggled with another quarter of flat growth, squeaking some earnings out of increasing deposit costs and low loan rates.
The Sacramento region's hot economy for the previous 12 years attracted banks to the area. Now that regional growth has slowed, many banks are searching for loan customers.

"A lot of banks have divided up the pie," said Gary Wright, chief executive of Stockmans Bank in Elk Grove. The bank was the most profitable in the market despite a 19 percent decline in the first quarter from a year ago.

"Things are flat. We're working real hard, and we're getting new customers, but it's tough," Wright said. "We're in it for the long term. This happens from time to time. I don't know if we will see much relief from this squeeze this year."
The mortgage problems related to subprime lending haven't been an issue for any of the local banks, but the general slowdown in the real estate market is putting a damper on some banking business.

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