Wednesday, October 22, 2008

MPS: The Textbook Way to Reduce Property Values

Insofar as we're not residents of Milwaukee, I don't have a dog in the fight--but as a State taxpayer, I have at least a squirrel or a chipmunk in there someplace. After all, State taxpayers send lots of money---LOTS of money--to MPS.

Anyhoo, the MPS Board has now virtually assured Milwaukee homeowners that their housing values will decrease.

...rather than increase taxes by 13.6% as Andrekopoulos proposed, board members Terry Falk, Michael Bonds, Jennifer Morales, Tim Peterson and Peter Blewett voted to tax to the revenue limit, an increase of 14.6% over last year, and to use the additional $2.5 million in tax revenue for plans including expanding staffing in early childhood classrooms, expanding drivers education and paying for all juniors to take the ACT

(Nice of them to pick up the $35.00 fee for ACT tests, eh? But if those kiddies go to college and actually learn real economics, those kids will never return to Milwaukee...)

MPS taxpayers were going to get hit no matter what. At 13.6%, the increase would have been $130/year; at 14.6%, it's $143.00.

David Riemer, who is damn good at 'running numbers' (in the corporate sense, not street-gambling) said what is pertinent:

“Most of the people who live in Milwaukee are poor, near poor or middle class,” Riemer said. “This is the worst possible time to impose a substantial increase in their already high school-property tax.”

Riemer trends Lefty, but he's not a doctrinaire wacko. And what he said is portentous. But his implicit prophesy is not good news for Milwaukee residents, nor for the City itself.

Most folks who are 'poor, near-poor, or middle-class' purchase a house based on cash-flow. In other words, the value of the property they purchase is directly related to the amount of money they can pay towards the mortgage. Property taxes are part of the mortgage payment.

As a result of this calculus, ANY increase in the monthly payment tends to result in a decrease in the value of the property. When prop-taxes rise, the $150K house becomes a $145K house.

Given the sub-prime situation, this move is not very smart. While the 20%++ decreases in property-values have not hit Milwaukee, there's no reason to think that they cannot do so; the recession is just beginning here, and employment is already headed down, rapidly.

That was "Cassandra" Riemer's un-stated message. But 5 MPS Board members couldn't read between the lines.

I'm old enough to recall that the Common Council of Milwaukee also tried to defy the laws of economics vis-a-vis Jos. Schlitz Brewing--attempting to force the Company to continue its operations here.

That worked out well, didn't it?


Anonymous said...

I have no problem with that. Madison is a negative aid district - we pay more in property taxes that we get in aid. Milwaukee on the other hand only pays about 30% of their educational costs. The rest is picked up by the state.

There is no reason Milwaukee should not tax up to the limit. Anything else is asking Madison and others to pay even more of their cost.

Anonymous said...

So, the rents of inner city residents will go up at least $10 a month just for MPS. Not to mention the increase the city and county (hopefully, that will be the same), MATC and everyone who else taxes. Can they really afford it?