Slumping economy could catch up to Grand Prairie next year

by Kirk Dickey of Grand Prairie TODAY

City Manager Tom Hart told city councilmembers March 3 that the Grand Prairie is working to meet expected property tax shortfalls in the coming year.

Hart said some tough choices might need to be made, but that with council guidance, the city is looking ahead to make the cuts as painless as possible.

The city's economic woes stem from the larger problems the nation is experiencing, with foreclosures and a down housing market lowering home values. South Dallas County home values have dropped about 10 percent according to some estimates, and Grand Prairie could see that reflected in its tax rolls beginning next year.

The city took a $2.5 million hit from a combination of fewer permits being issued and a $900,000 sales tax refund to a local manufacturer, after an audit turned up an overpayment from 2001-04. Hart said that actions have been taken to limit the impact of that loss on the city's $96 million total budget, including freezing hiring and other cuts.

“Do we have any problems this year? Absolutely not, barring something unseen,” he said. “We are totally on top of this year and we are fine.”

But Hart's outlook was not as sunny for the coming years. The city expects to carry about $2 million of those losses into the next year, but drooping home values are of greater concern.

The city has worked with the Dallas County appraisal district to determine the city's home values by neighborhoods. DCAD looked at homes that sell outside of a 95-105 percent window of their previously appraised value, a condition which flags those homes for reappraisal.

Looking at Grand Prairie, 992 homes were sold in 2008 in the Dallas County portion of Grand Prairie. Those homes sold at an average price of $112,000. The average appraisal value of the homes was about $124,000, which works out to an about 10 percent difference.

Sixty-nine percent of the homes sold in Grand Prairie sold for less than 95 percent of their appraised value. They sold at an average of 86 percent of that appraised value.

Homes that sold for more than 105 percent of their appraised value, sold at an average of 117 percent of that value.

“There was only a smaller percentage of that,” Hart said.

The city has $5 billion in residential home values. Hart expects the property tax losses of about 6 percent, translating to about $1.5 million, next year, although the numbers are fluid.

The city is less sure about the commercial property tax values, but Hart expects them to cost millions more.

“We don't want to overreact to this, but in all probability, that (home value drop) is catching up to us next year, and it is going to hit us pretty hard,” he told the council.

Hart said the city is working to get things into shape this year so that the city can weather the storm next year.

“We are going to look at significant deep cuts in everything,” he said. “Those cuts will be across the board. There will not be any department that will be excluded.

The city will look at cost-saving changes to library hours, rec center hours, mowing schedules, watering schedules and swimming pool use. Ultimately, he said, the shortfall could mean employee cuts, not just position elimination through attrition, but true job loss.

“The bottom line is, I can't address cuts that deep without it impacting citizen's services,” he said. “We are going to look at it in a way that minimizes that. I will not take cuts past a point I think we can live with.”

He said that if the cuts get too deep, he will have to come back to the council for their guidance.

City Councilman Jim Swafford was credited with identifying the problem first a few months ago and urging Hart to start planning ahead. Hart said the city started contingency planning and is in better shape now for it. He thanked Swafford for his foresight, but said, all the same, “I hope you are wrong.”

For his part, Swafford said the city council needs to understand that serious funding and priority changes might need to be made to ride out the turbulent economic times.

He emphasized the importance of looking forward two or three years, to make sure the city is on the right track. And he warned that there may be some proposed changes in capital improvement projects that may seem drastic, but he wants the council to keep an open mind.

“Going forward, this is the time to be drastic and not get caught with our pants down,” he said. “We all need to be open-minded in these times.”

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