Montgomery County budget and financial analysts say home prices have become disconnected from demand and the county should be prepared for the consequences.
“A lot of people now are not going to get the prices they think they are going to get” for their homes, the county’s chief economist, David Platt, told the County Council Monday.
Housing prices increased 18 percent in 2005, though construction of new homes dropped 24 percent and overall home sales fell from 17,753 in 2004 to 17,011 in 2005.
Council Member Phil Andrews, D-District 3, suggested the council may need to rein in spending in future years to ease the burden on homeowners.
He said a budget plan that does not expect the council to stick to a voter-imposed property tax cap over the next five years would be unrealistic.
“The key to affordability is not to be able to afford it this particular year, but to be able to sustain it year after year after year,” he said of the $3.9 billion budget proposed by the county executive earlier this month.
Under the county charter, total property tax revenues are limited to inflation plus the value of new homes built. Under state law, the council may set that limit aside in any given year and increase property taxes by up to 10 percent.
“If you limit your property tax revenue to the charter limit rather than the 10 percent assessment cap, you lose each year a growing amount of revenue,” budget analyst Steve Farber told the committee.
He estimated the total cost to the county over five years to be about $1.6 billion if the council continues to abide by the charter limit as it did this year.
The proposed budget includes a 9.5-cent property tax cut and keeps spending within the charter limit.
Committee Chairwoman Marilyn Praisner, D-District 4, suggested the council may want to look at other forms of tax relief, such as a temporary drop in the county’s energy tax once an expected 38 percent increase in Pepco bills hits residents’ checkbooks this summer.
Economic indicators looking good
» County unemployment: 2.7 percent
» Regional unemployment: 3 percent
» Regional job growth up 72,000 jobs since this time last year.
» Montgomery business centers accounted for 13,000 of those jobs.
