San Bernardino Troubles Attributed to Decline in Property Taxes

The city of San Bernardino is planning to file for chapter 9 bankruptcy protection, as it has seen large numbers of foreclosure activity during the last few years. In May and June the city had the dubious honor of having the third highest foreclosure rate amongst California cities with a population of 200,000 or more.

Trouble ahead for San Bernardino

Foreclosures and a decline in property taxes are creating considerable problems for the local governments of cities like San Bernardino, according to RealtyTrac , who have pointed out that once people stop paying their mortgage there are also likely to stop paying property taxes. The local government used to obtain a fair portion of revenue from property taxes, but these are currently capped at 1% of the home's value.

This problem is tending to affect inland areas of California, as the coastal communities have generally fared a lot better during the recent downturn. Home prices in coastal communities tend to be higher and houses have retained their value. There is little doubt that inland cities have felt the pinch since the housing crisis began, but there are signs it may be stabilizing, and these areas could see stable property tax revenues being collected once more. San Bernardino County recently reported that property values had increased by 0.8% from 2011 which is the first price rise since 2008.

Although a decline in property taxes is part of the reason for the city's shortfall in revenue it is only part of the picture. People are spending less so income from sales tax has dropped considerably. In June the city of San Bernardino had 2,527 properties in foreclosure which is 3.5% of all housing stock. This is more than three times the national average of 1.02%, and is considerably more than the 1.9% average in the state of California.

Apparently there have been allegations of possible criminal activity within various departments of San Bernardino city government, and a criminal investigation into any possible misconduct is currently underway.

 

Image courtesy Pete Zarria via flickr.com