Cities in Serious Trouble as People Can't Pay Property Taxes

Mish

Cities are struggling with falling revenues and property tax collections.

City research in Vancouver shows found 25% of residents can't pay property taxes and a whopping 50% struggle with rent.

The story is not just about Vancouver, Canada. Rather it applies to cities globally, all facing a similar setup.

Please consider Vancouver Mayor is Worried Over Property Tax Collection.

Kennedy Stewart said Sunday the city could lose up to $500 million from its operating budget, which would be “absolutely devastating.”

If we lost half a billion dollars in revenue, we would have to really burn through all our stand-by cash we have, all our reserves, and we may even have to sell some city lands in order to meet all our obligations, so it’s a very serious situation,” he said.

In addition to property tax concerns, sales tax and fee collections are in the gutter, everywhere.

And if people struggle to pay the rent, landlords in turn cannot pay their bills, including property taxes.

This setup is not unique to Vancouver. It's playing out across the US and Canada.

Mike "Mish" Shedlock

Comments (87)
No. 1-27
IGA
IGA

And there were already plenty of cities struggling before this. Consumers, companies and governments are all in trouble here

TimeToTest
TimeToTest

Looks to me like a shortage of money.

I think the best solution is to print more.

Correct me if I am wrong but isn’t printed money free?

marcus skeptus
marcus skeptus

So far the public sector (working or not) in Canada is receiving their full salaries, meanwhile the private sector has been reduced to $2000/month assistance

marcus skeptus
marcus skeptus

I wonder how long the lock-down would last in Canada if public sector wages were reduced to $2000/month to match the private sector?

Carl_R
Carl_R

Around here that is never a problem. If people don't pay their taxes, someone else pays it for them, and then collects 14% interest on it. If they don't get paid back, they get the property in the end.

Tony Bennett
Tony Bennett

Sounds Inflationary

awc13
awc13

well, they will need to layoff employees just like businesses have had to do in reaction to government shutdown directives

Blurtman
Blurtman

Cut services. The pensions must be paid.

Irondoor
Irondoor

The US has a choice. If we want the dollar to remain the world's reserve currency (and there are many reasons we want that, the main one being we can keystroke as many dollars as we need. No other country can do that), the Fed has to print to provide the world with the necessary dollars to settle trades. Sellers won't accept T Notes, they need dollars. So, the Fed swaps dollars for Treasuries held by foreign central banks. It also swaps dollars for some foreign currencies (Euros, Pounds, etc).

We are not talking about a few billion here and there. This is going to require many Trillions just to grease the wheels of global commerce. Or would you rather see the Chinese Yuan as the global reserve currency?

What the hell currency do you think all those derivative contracts settle in?

Bob42
Bob42

Stop buying cheinse products. Stop sending them food they must pay for the disaster they manufactured

NewUlm
NewUlm

Destroy the economy by executive order -> then wonder what happens to tax revenue. NOBODY could have seen this coming.

I live in WA, tax collection is being destroyed as well... I am sure the geniuses who caused this will push for a big tax increase soon instead of spending cuts to match. And the folks here in SEA cheering for economic destruction (for the perception of safety) will cheer this on as well.

Also, Break-ins - UP, Domestic Violence - UP, Child abuse - UP

TumblingDice
TumblingDice

Who didn't see this coming? Time to end the indiscriminate shutdown. People are still going to get sick.

Time to put some brains behind shutdown. For example why do golf courses need to be shutdown. That is tax revenue that could be collected.

truthseeker
truthseeker

So how long can this bizarro world continue to exist? Who would have guessed that 20 years ago, I’m guessing I’m right about this, our budget deficit was close, but had not reached the trillion dollar mark. Well now we’re at about 23 trillion I think, and many asset prices such as oil and natural gas, agricultural products, stocks, commercial and residential real estate prices and services are deflating even as the Fed continues to print trillions to bailout just about everything. So many people having lost their jobs and so how are they going to pay for everything such as the house payment or rent, property taxes, car payment, insurance, credit card, health care, tuition, electric bill, utilities and everything else even with food stamps? And when is inflation ever going to show up? IMO Bernanke should have never started with QE-1. After the initial 800 billion liquidity needed to get the banks back open, we should have had a massive restructuring of everything, allowing real defaults and failures to clear the whole financial system of debt just to start with.

George Phillies
George Phillies

Amusingly, when I called my city hall and offered to pay off my property taxes for the year, right now, they asked me to call back in June.

mark0f0
mark0f0

that's not fully true. There's been lots of layoffs in the public sector. My brother-in-law was laid off from his librarian job.

Bam_Man
Bam_Man

But the inflation-adjusted pension checks and free health care for life have yet to stop.

ohno
ohno

Then you have federal employees, like my neighbors, both sitting at home making almost $40hr each because they have health issues that could be a threat combined with covid19. Both are disgustingly overweight(how they do their labor jobs i'm not sure), smoke and drink EVERYDAY. I'd imagine there are 1000's just like them.

Maximus_Minimus
Maximus_Minimus

Vancouver, BC can sell bubble bonds. You know, bonds that pay when the housing bubble goes higher and a crap lot sells for a few billions. There is your money, mayor.

Sechel
Sechel

I was just looking at some New York City bonds. All taking hits

silvermitt
silvermitt

I have a question, Mish, that is specific to Vancouver. It wasn't that long ago the wealthy of China were looking for a resting nest egg and found it in Vancouver real estate. Hence the locals were so far priced out of the RE market that they couldn't even buy property there anymore. How does this affect the tax issue the city is facing now? Do all those Chinese Nationals still own those properties? If so, are they paying the taxes? Obviously the end result will be the crushed poverty stricken population. But you're opinion?

thimk
thimk

expanding budgets based on increasing property valuations . Vancouver approved 7% property tax increase for 2020 plus additional $225 business tax.

SynergyOne
SynergyOne

Here is an idea for local governments. Start scaling back spending! Just as individuals need to scale back when they are out of a job governments need to do the same. Get rid of extra buildings, reduce the size of the workforce, scale back on grandiose things that should have never been signed up for in the first place!

wootendw
wootendw

Ultimately, less taxes mean less government, so this is something to be optimistic about.

Jojo
Jojo

Traffic drop from stay-at-home orders imperils road funding
By DAVID A. LIEB Associated Press
Apr 12, 2020

JEFFERSON CITY, Mo. (AP) — America’s roads are a lot less congested, due to coronavirus shutdowns that have kept millions of commuters, shoppers and vacationers parked at their homes.
While that makes it easier to patch potholes, it also could spell trouble for road and bridge projects. The longer motorists remain off the roads, the harder it will be for states to afford repairs in the months and years ahead.

Pat789
Pat789

All these Cities across the USA that are headed towards bankruptcy and severe financial problems....should consider reducing there payroll by eliminating enough jobs to make them stay afloat and viable. If small businesses have to do this to survive than City, State and County gov't should do the same.

Sechel
Sechel

Trump bails out dubious companies but partisan politics means cities and states left hanging.


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