If you think State and local governments have financial problem now, just wait until they try and figure out budgets for 2012. 2010 was bad. The 2011 State and local budgets required the Feds to use a mini-QE of $26 billion (at this count but it'll get bigger!) to keep teachers, policemen and firemen employed. There must not be anyone working for Lake County, where I live, except Teachers, Firemen and Policemen because I've never heard of anyone else. The mini-QE will be larger before budget time in 2011 comes around.
Last year (2010 assessment) my home was assessed at a price 15% lower than it had been in 2009. My property taxes went down. The city in which we live (using the term loosely as my "city" is really the little piss-ant County seat of Lake County Florida and maybe has 18,000 permanent residents) panicked in the budget of 2010, threatened to use "rainy day" emergency funds to fill the gap and finally, when the citizens of my little town rose up and read them the riot act, managed to shuffle funds, not hire positions than came vacant and laid off about 1/10 the number of dead head employees they should have. Next year they will right back deeper into the soup.
Why? Well, I received my TRIM notice yesterday ( That's a statement of next years property taxes which can be paid at a small discount as early as this November) and the assessed value of my home dropped another 33% from 2010. Total drop in assessed value since 2008: 58%. My proposed property taxes dropped 30% from 2010 to 2011. We are lucky in this county in that we have an honest Tax Collector who cannot be influenced by political pressure and plays the game straight up.
I'm also lucky in that I bought the home 12 years ago for cash to use as a cave in which to shelter from the elements, sleep and cook, not an investment and I have no plans to sell it. If it eventually drops in value to zero, I will still have saved money avoiding rental costs over that period of time.
I've check with several dozen other residents across the country and, on average, the 2011 tax receipts will be down from 28% to 38% putting the towns and County deep behind the 8-ball in a position where there will simply not be sufficient funds to featherbed so much as a janitor at the County Jail.
It turns out our situation is not unique. Those area hit hardest by the continuing housing crunch, which also happened to be the places where the bubble grew fastest and popped with the biggest noise (Nevada, California, New York and Florida) are all in the same boat - where the assessments are honest and the tax rates are not jacked up by the taxing authorities to make up the difference.
That, coupled with an absolutely huge requirement to refinance (called, "roll that loan if you can!) over a trillion dollars of maturing commercial real estate loans will make 2008 look like a party hearty year as far as financial trouble is concerned.
I've been counting foreclosure notices in our small local newspaper. The totals run 4-6 full pages, dipping now and then to 4 pages, returning to 6 pages (as it was yesterday) of nothing but foreclosure legal notices, auctions of real estate, etc.. The number of foreclosures wax and wane but have been getting worse over the past 5 months.
There are dozens of families and individuals South of us in Orlando that are simply squatting in foreclosed homes until the garbage, unkept lawns or an occasional fire set by warming baked beans on sterno cans alert the authorities who sometimes don't even evict the squatters after they been nailed. Such a deal. Three families plus a few odd ghosts totaling 14 people were discovered last week living in a foreclosed home that was assessed at $3.5 million. They had been there for 6 months.The estimate to refurbish the house to get it in salable condition was $150,000. It was trashed - totally.
If it's this bad in Florida, what's it like in California or Nevada where conditions are far worse? What are we not being told?
A far worse situation exists here in Florida that has not received any publicity at all except short mentions on the bottom of the third page of the fourth section of the newspaper.
Right now almost 3 out of 4 mortgages in Lake County are under water.
But a worse dragon than alligators are lurking in the weeds. They are called Residential Development Districts and they are custom made for financial abuse and making developers rich at the expense of senior citizens who purchase retirement homes in one of these Residential Development Districts.
In the State of Florida, 226 local development districts are in foreclosure. A local development district is a Florida special deal for developers allowing them to build in the unincorporated areas of the County and operate as if they were a city with ability to sell bonds, collect fees and, in fact, do everything a city might do except for police powers. The County sheriff does that, sometimes for a fee.
Politically favored developers (of which there are hundreds - they form the largest lobby group in Tallahassee and pay millions of $$ a year to politicians to buy whatever they want) purchase options on, say 1,000 acres of Florida scrub and swamp. They then declare and file with the State and County to establish a Residential Development District with the goal of building the infrastructure to support 3,000 homes, shopping centers and such (look up "The Villages" on the internet - that's a group of Development Districts). Now, before a single house is surveyed or a single street is started, this fictional ghost of a "Development District" sells a raft of bonds to pay for the land and all the improvements and of course, the developer takes a cut of it all. He has an investment group to pay the interest on the debt until he builds some houses and sells them, at which time the home owners have to start kicking in "amenity fees" which, in addition to paying off the bonds, pay for all the upkeep on the infrastructure that is being built and will be built.
This works fine until the lots and houses stop selling. The developer then files bankruptcy, leaving the entire mess, debt and unfinished development for the few home owners who were unlucky enough to be first in line for what turns out to be a "Heads I win, Tails you loose!" for the developer. He has already taken the bond money and vanishes, leaving all this wreckage behind him and thanks to a crooked Florida State Government, it's all legal and the fat cats wins, developer and politicians but not the unsuspecting purchasers of the "developments".
I repeat, there are currently 226 such Residential Development Districts (8 or 9 here in Lake County) that have gone belly up since the real estate market collapsed in 2007-8. The people who live there are going to be getting much poorer as the bond holders expect to be paid on the basis that all the homes are sold and contributing to pay them off (when really only 15% of them are) or the home owners (mostly retired and on fixed incomes and screwed) are going to walk off and leave a broken key in the lock since 90% of them are underwater anyhow on their mortgages. They may as well walk off and leave them to the squatters.
Yet all we hear is that "Things are Getting Better!"(smiley face)… Bah. Our local unemployment rate just went up again in July to over 12% (understated by at least 6 percent or more) and will go up again this month.
Now take this scenario and run it nation wide. I think we're in far deeper trouble than shows up on the surface or is being broadcast. Given a choice of a cheap house in a residential development district here in Florida or living at a State campground in a tent, I'll take the tent every time!
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