An exercise in futility

April 27, 2011|By TAMELA BAKER

Right, wrong or indifferent, there’s been a longstanding suspicion among many that the Washington County government is firmly entrenched in the pockets of developers who are being given carte blanche to run roughshod over anything that gets in the way of their profits.

The Commissioners have done little of late to dispel that impression, making a controversial appointment to the planning commission and granting waiver after waiver of the excise tax on new residential development.

Developers, not surprisingly, have never liked the excise tax, which was designed to ease the burden of financing new roads, utilities, schools, etc., necessitated by new home construction. And truth is, the county’s handling of the excise tax has been, well, let’s call it clumsy, pretty much from the start — and long before the current commissioners took office.

Since this is not a home-rule county, most tax changes must officially go through the General Assembly. And legislation to, well, let’s call it improve, the excise tax evolved so many times just while I was covering the assembly that Darwin himself couldn’t have kept up. Should it be charged by square-footage? Should it be a flat fee? How many units per development? Is senior housing exempt? Low-income housing? What if it’s Thursday and there’s a full moon?

It was a mind-numbing, eye-glazing experience, especially for those who had to try to cost out a project without knowing what the final calculation would be. Developers had every reason to be frustrated.

Back then, of course, home sales were brisk. Developers couldn’t get building permits fast enough. But now that the real estate market has done a 180, developers are finding business a little, well, let’s call it sluggish. The culprit? That darned excise tax, naturally. Excise the excise tax, and everyone lives happily ever after.

At least that’s what developers told the commissioners when they were lobbying for the, well, let’s call it a stimulus, that involves waiving the tax on at least some of their planned development. Ditching the excise tax would encourage developers to start building again — without passing the tax on to would-be buyers — which would in turn put laid-off construction workers back to work. Besides, they noted, development would bring a residual economic effect.

And the commissioners bought it — again. The last board of commissioners gave developers a similar break in 2009, which resulted in a temporary surge in construction. And when this “stimulus” expires, somebody will inevitably start lobbying for another. If they get enough waivers, developers could effectively eliminate the excise tax, sidestepping the General Assembly altogether. It’s a masterstroke.

Except for one thing.

Has it occurred to anyone that maybe the real reason the construction industry is in a slump is not the excise tax at all? That maybe, just maybe, it’s a simple matter of supply and demand?

On the week the commissioners approved the excise tax waiver, Washington County had more than 200 homes listed as active foreclosures or short-sales, and roughly 1,000 homes on the market at greatly deflated prices. That’s a home for sale for every 14 people in the county. And that’s not counting the number homes withdrawn from the market because their owners simply gave up.

Property value assessments for tax purposes have plummeted as a result — by a solid third in many cases — and consequently the county’s revenue projections have plummeted too. For the third year in a row.

Put simply, we have way too much housing supply and precious little demand.

The developers’ arguments about spurring the rest of the economy tend to assume that homes are selling. That’s a pretty shaky assumption, sales figures being what they are, and the real victims in this mess know it: They are responsible property owners who tried to do everything right, who didn’t buy more house than they could afford, didn’t gamble with their mortgage rates and kept up their payments even in lean times — but have been forced to watch helplessly as the equity they thought they had in their homes evaporates.

For most of them, that home is the largest investment they’ll ever be able to make, and now that investment — which many of them counted on for retirement or other necessities — has been devastated, perhaps irreparably.

In their view, we need to stimulate even more homebuilding like we need to stimulate bubonic plague. Why? Because building more houses  before the real estate market has a chance to absorb the existing surplus is actually hurting this county’s economy, and badly.

The commissioners need to fix the excise tax once and for all so that it is equally fair both to developers and individual property owners. Set the calculation and review the percentage factor every three years or so to reflect actual cost for new infrastructure, and be done with it. And let’s all concentrate on solid, diversified business expansion outside construction so we can create buyers for all those houses the developers want to build.

Tamela Baker is a former Herald-Mail reporter and editor.

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