Do Short-Term Solutions Solve Long-Term Problems?
The fiscal year ended on June 30th for the county and in another month or so we will have the audited year-end numbers for its operational and capital budgets.
This will tell us how we have done financially. What it won't tell us is how we are going to do this year.
One of the indicators of what to expect is the number of permits issued for new housing. As of the just posted June report on the Planning Department's web page, Frederick County issued 1,479 permits from July 1, 2002, through June 30, 2003.
The previous year it was 1,903 permits and the year before that it was 2,829 permits, in essence a 50% drop in just two years.
If we believe this trend has bottomed out, how many permits can we expect by July 1 of next year? So far this year (January to July) the county is about 21% below the historic 14-year average, running about 145 permits a month. Assuming the remaining months follow this trend, we may see 1,736 permits by July 1, 2004.
So you may ask, what does this all mean?
As I write this, one of the county commissioners is proposing a "Fair Share" or "Infrastructure" Excise Tax to replace the Impact Fee. Because most of the growth models for almost 20 years were predicated on average 2,000 units a year, operating budgets were formulated accordingly. The housing drop is causing a strain on revenue forecasts for the county.
With this approximate 26% drop in revenues derived from these new homes, the costs have to be made up somewhere. Hence, the plan to raise more money on the backs of individuals scarcely able to afford these new homes today.
Another factor in the housing market to consider is Iraq. How can that be, you may wonder? Well, if you know folks in the construction business, just ask them about the price of lumber and if they can find the quantities they need.
With the tremendous push to re-build Iraq, huge quantities of building materials will be diverted from the American market and shipped overseas. This reminds me of a similar situation about a decade or so ago with short supplies and rising costs for materials for construction.
If we combined the high costs of land (I've heard about $100,000 for a building lot in Frederick County), roughly $20,000 for permits and fees, and now the potential for considerable increases in material costs, is it any wonder why the average single family detached home now exceeds $300,000. So much for affordable housing.
Now the county wants to study a method to raise those permits and fees even more.
Maybe it is time to step back and assess the true economic picture of what we are doing to ourselves.
Supply and demand is a function of price, or is it the other way around - I'll let the economists explain that one.
It would seem to me that if we need to keep raising our county fees to cover our projected shortfall, would not it make sense to lower the fees in order to have a few more houses built to meet the demands of the marketplace? And, who knows, maybe even make them a little bit more affordable. If raising fees has reduced the number of houses and its corresponding revenue, would not having a few more houses built with lower fees generate more overall income?
Granted the "impact fee" money might be a wash and are one-time only, but think about all the other revenues we receive from new homes - property taxes, income taxes, sales taxes, etc., that are collected annually.
Also, if the number of housing units continues to fall, don't you think that might affect some businesses around the county that are anticipating growth in their revenues because of more customers?
It is a shame officials seem to only focus on one thing at a time instead of the overall picture. By looking at only one thing at a time it may only solve part of the problem for a short while. Oftentimes there are unexpected consequences of these types of actions.
I think it is time to get away from this method of short-term solutions and begin to make strides towards a better-balanced, more constructive way of providing stable sources of revenues to the county coffers. This would allow for better predictive budgets and more executable capital projects - on time.
With an economy that still is not doing what many feel it should and the prospect that it could even get a little more tenuous, shouldn't we be looking to a better way to provide affordable housing, a growing local economy and a sustainable funding source to keep our government providing the services we need?