Why our fiscal problems will not improve soon

The chart below comes from Zillow.com, and depicts a 15.9% year over year decline in the average price of a home in Sterling Heights.

Since taxable values are derived from the home sale prices, we can see there will be long-term effects on the city’s ability to generate revenue.

It is very instructive that the average sale prices continued their free fall over the past several months. What does this mean?

  • First, the city cannot spend its way to higher home prices.  Any discretionary dollars spent on “quality of life” improvements were wasted, or worse, helped to continue the overall decline.
  • Second, the police labor contracts are being negotiated during record bad times for the city’s prospects of being able to pay for them.   It is time to bring spending on Police and Fire in line with the state averages, rather than being at the top.
  • Third, the SHINE program had better be everything the city claims it will be, or it will go down as being a tremendous waste of money.

I would expect, given a chart like this, that the number of walk-aways going into foreclosure will increase.  If I wasn’t committed to doing the right thing (and hanging on to my excellent credit rating) it would certainly be the smart move for us to walk away.

The direction of the line on this chart may well start pointing upward by 2014, but how much ground will there be to recover by then?  Spending down our general and other fund balances to continue with business as usual is foolhardy at best.  And if the Fire ALS Transport issue isn’t examined extremely carefully, it could put us under in a hurry.

Edit: uploaded the correct chart.


Posted on May 16, 2011, in Issues and views. Bookmark the permalink. 2 Comments.

  1. 100% spot on. The City Council is being foolish by not getting serious about controlling spending.

    I wish some conservatives would run for council. Ziarko can’t do anything but vote with the the majority, Schmidt serves no purpose but to be cheerleader for social events and Romano’s integrity is seriously in question to me.

    • Well there are some “conservatives” running besides the incumbent Michael Taylor, who is the real deal. I’m personally not in support of the quote-unquote variety that seems to hail from the batshit crazy wing of SH politics, but there is one other fellow out there who’s stayed pretty quiet so far who might be a good candidate – Gary Lusk.

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