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Housing market hurting revenues

November 16, 2008|By JOSHUA BOWMAN

WASHINGTON COUNTY -- A sharp drop in home sales has caused excise tax revenues to fall millions of dollars below budget for the last two years.

Washington County financial records show that shortfall continued into fiscal 2009, which started July 1.

The county earned $239,808 in the first three months of fiscal 2009 from residential excise taxes, which are charged on new home construction.

Another $72,400 was collected from adequate public facilities ordinance (APFO) fees and mitigation fees, which sometimes are paid in lieu of excise taxes.

Washington County's quarterly financial report shows that collections from excise tax, APFO and mitigation fees were $536,858, or 62.8 percent, below budget projections.

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The county issued 37 residential building permits in the first three months of fiscal 2009, a 51 percent drop from the 76 permits issued in same period of fiscal 2008, the quarterly report shows.

"It's definitely still way down," Washington County Permits and Inspections Director Daniel F. DiVito said.

Excise tax is meant to offset the costs of growth; most of the revenue is used to help finance road construction and capital projects for the public school system.

A small portion goes to public libraries, parks, land preservation and other infrastructure.

In fiscal 2008, the county collected about $2 million in residential excise tax revenues, well below the $6.57 million budgeted for that year.

The county transferred $4.5 million in reserve funds to the capital budget and delayed some projects to cover that shortfall.

The county has lowered its residential excise tax budget for fiscal 2009 to $3.36 million but is still well below budget projections.

Washington County Budget and Finance Director Debra S. Murray said in an e-mail that the county is expecting a shortfall again in fiscal 2009, though she said the exact amount has not been determined.

Murray said the shortfall will be covered with reserve funds.

Under a new excise tax ordinance approved by the state legislature, the county commissioners now have the freedom to raise or lower the residential tax rate.

The tax is $3 per square foot for residential construction but can be increased to as much as $4.50 per square foot.

All five commissioners said this week that they do not want to raise the excise tax rate.

"The problem is not the rate, it's that no one is building," Commissioner William J. Wivell said.

Commissioner James F. Kercheval called raising the rate "highly unlikely."

Barr said it would be "counterproductive" to raise the tax rate because it would discourage new home construction in an already depressed market.

All five commissioners said this week they expect to delay more capital projects again this year.

Commissioner Kristin B. Aleshire said it makes sense to delay new projects if fewer homes are being built.

"You can't say you need a high school in 2012 based on 5,000 homes of growth if you only get 1,000," Aleshire said. "I think the way you address (the budget shortfall) is you back those projects up."

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