With the nationwide housing slump continuing, officials in Oak Park are carefully assessing the effects of that reality on real estate transfer tax and building permit revenues as they look to budget for 2008. Officials say that while they’re concerned, there’s no cause for alarm.
With the current year two-thirds over, real estate transfer tax (RETT) revenues appear to be lagging while building permit revenues are up. The village is on a pace to collect $4.07 million in real estate transfer revenue in 2007, which would be down by over $700,000 from last year. And permit increases, said Craig Lesner, Oak Park’s chief financial officer, were most likely due to a permit rate increase this year rather than more remodeling and expansion projects being undertaken.
Lesner said that predictions are nearly impossible to make with both transfer tax revenue and permits.
“You’re fortune telling to a certain degree,” he said. “I make the argument that there isn’t a key indicator.”
Lesner admitted he hadn’t conducted an extensive analysis of the housing market, which he characterized as “soft.” He said he planned to wait as long as he could before making a final projection for 2008 transfer tax revenues, hoping for as much data as he can gather.
“My game plan is to submit recommendations for the budget in early to mid October,”
The housing market and overall credit market can also impact demand for building permits (construction, electric, plumbing and heating and air conditioning work). Revenue from those permits so far in 2007 permits totaled $1,449,065.71 as of August 31. That’s close to double the $797,727 collected at that time in 2006. If revenues continue apace, they will double last year’s collections.
REET revenues represented about 10 percent of all general fund revenues in 2006, with building permit fees adding another 2.25 percent. So far this year REET revenue constitutes 9.5 percent and building permits 5.1 percent. Permit fees increased after the village went from using square footage to a percentage of construction cost to calculate fees.
“It’s hard to figure out how quickly the RETT revenues will go down,” he said. Lesner said he plans to sit down with Oak Park Township Assessor Ali Al Safar this week and try to read the tea leaves.
“I’ll ask Ali ‘What have you been hearing, what’s happening with the seven percent tax cap, where’s property going in general,” said Lesner.
Al Safar agreed Friday with Lesner’s general assessment of the housing market. For nearly a decade, he said, the common expectation was that housing values would keep going up. That, he said, was unrealistic
“One reason the housing market is slow is that people don’t want to sell at a loss,” he said. Village homeowners, he said, now find themselves confronted with stagnant prices and both high mortgage rates and high taxes.
Al Safar said if he had to make a revenue projection for 2008, he’d be conservative.
“Either a small increase or a small decrease,” he said.
Lesner agreed, though he’d likely trend downward rather than upward.
“If I’m going to be wrong, I’d rather be wrong in finding we’re generating more revenue than we thought,” he said.