by Councilman Tom Butt from his email forum:
Here is the simple explanation of how we got here. Sales taxes and utility users taxes have remained flat since before the recession, and property taxes have declined. Meanwhile, the expenses of operating a city continue to climb, particularly for compensation, which continued to be adjusted upward to match inflation, the SF Bay Area Consumer Price Index and regional market conditions.
The decline in property taxes is due to (1) the Chevron fire, and (2) undervaluing of Richmond real estate by the county assessor. Despite Zillow showing that Richmond home values have gone up 33.7-percent over the past year, and Zillow predicts they will rise 11.9-percent within the next year, the assessor substantially devalued Richmond real estate, resulting in a significant drop in property tax revenue.
Foreclosures will be a factor impacting home values in the next several years. In Richmond 3.0 homes are foreclosed (per 10,000). This is greater than the San Francisco Metro value of 1.7 but lower than the national value of 4.8.
Mortgage delinquency is the first step in the foreclosure process. This is when a homeowner fails to make a mortgage payment. The percent of delinquent mortgages in Richmond is 6.2-percent, which is lower than the national value of 7.2-percent. With U.S. home values having fallen by more than 20% nationally from their peak in 2007 until their trough in late 2011, many homeowners are now underwater on their mortgages, meaning they owe more than their home is worth. The percent of Richmond homeowners underwater on their mortgage is 27.8-percent, which is higher than San Francisco Metro at 10.5-percent.