Atlanta's lack of tax revenue for schools comes from Foreclosures

Like all Atlanta homeowners, I received my Annual Notice of Assessment on my property value, which in Edgewood was valued at $88,500 that dropped from $117,400 for 2009-11.

Of course that should be a good thing, since I pay less in taxes, but certain groups are getting less tax revenue, such as:  County operations, Hospitals, County Bonds, State taxes, Atlanta operations, Atlanta bonds, Atlanta parks, Atlanta libraries, Atlanta sanitation, School operations/bonds.  This explains Atlanta Public Schools lack of tax revenue of $120M for 4 years.

The DeKalb County appraisal process is based on three approaches to determine property value.  Cost Approach using the Computer Assisted Mass Appraisal (CAMA) system.  The Market Approach that looks at recent real estate sales.  And the Income Approach for commercial property or income producing property comparing sales ratio studies.

90% of home value comes from the sales in your area.  If those sales were bank-owned foreclosures, modification or short sales, then your house value goes down; and Atlanta police, firefighters and schools get less money and lose jobs.

Georgia, has been on RealtyTrac Foreclosure Rate Heat Map top 10 for foreclosure rates ranking, since 2006.  Atlanta has been in the top 25 cities in America for foreclosure from 2006-2011.

Since APS funding comes from DeKalb and Fulton property taxes, then foreclosure affect tax revenues.  For June 2012, GA had 84,780 foreclosures or 1 in every 336 housing units, which received a foreclosure filing.  Fulton was #2 on Foreclosure Activity Counts and DeKalb was #3.  Fulton had 10,171 foreclosures or 1 in 361 housing units, while DeKalb had 7,374 foreclosures or 1 in 304 housing units.

For May 2012, GA had 78,454 foreclosures or 1 in every 300, while Fulton was #1 with 9,479 and DeKalb #3 with 6,585.  I bought my home in 2006, when GA was #2 on the top 10 list for foreclosures and Atlanta/Sandy Springs/Marietta was #2 on MSA top 100 list with 63,737 foreclosures for 2006.

DeKalb County School board debated to fill a $85M budget gap by cutting programs like:  $1.9M or 40% of Fernbank Science Center's $4.7M budget, two furlough days, increase class size and cut jobs.  Also, they approved a property tax increase to DeKalb homeowners for schools.

Fulton County School board approved the 2012 budget of $819.5M with cuts like:  three furlough days, no raises except for substitute teachers and bus drivers.  Fulton will add 102 new employees, including 90 teachers.  Fulton was going to increase property tax, but decided not to, because of improper property appraisals.

The reason for property tax increases in DeKalb, is because of the increase in foreclosures and lack of revenue.  The reasons anyone would foreclose on their home varies:  Job lose, job transfer, a change in job income (like making $60K a year to $20K), mounting debt, sudden medical expenses that make them bankrupt, divorce, drop in their business revenue, owning 2 or more properties etc.

To help homeowners modify their home loans.  Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally settled over the abuses of robo-signing, foreclosures and mortgage process at $25B, which states would get $2.5B to help homeowners.

Instead, some states have used their $2.5B to solve their state budget gaps; only 27 states used the funds for housing programs.  Governor Nathan Deal “decided to use the discretionary money for economic development...(and) believes that the best way to prevent foreclosures amongst honest homeowners who have experienced hard times is to create jobs here in our state.”

Some have been encouraged to walking away from their underwater homes like YouWalkAway.com.  Some find walking away hard like, Brent White's study “Underwater and Not Walking Away:  Shame, Fear and the Social Management of the Housing Crisis.”  Because it makes sense that some will cut their losses and leave their home, like any business would, “But they aren't...A lot of it has to do with shame, guilt and fear.”

Robert Shiller, a Yale professor believes “Homeownership is...an extension of self; if one owns a part of a country, one tends to feel at one with that country...(which is why) Policy makers around the world have...supported the growth of homeownership.”

Some say foreclosure, should be the last option, before modifications and short sales.   Adam Pedowitz, of Distressed Property Institute says foreclosures can reduce a homeowner's “credit score, tax liability, even the ability to find a job.”

Bob Massi, a Fox News legal Analyst shows three reasons why loan modifications are wrong because: 

1. “To Qualify for a loan modification, you need to jeopardize your credit rating.”
2. “If you qualify...you still have to make regular payments during the bank's 'trial period...of six months.” 
3. “Loan modifications don't solve the bigger problem...(that you are) still paying on a house that is worth less than you owe.”

Bank of America, Chase and Wells Fargo are giving “struggling homeowners payments of up to $30,000 if they sell their homes in short sales,” yet banks take a hit on short sales “because they forgive the difference between proceeds from the sales and the mortgage balance.”

Bob Massi, believes short sales are wrong for the homeowner for three reasons:  

1. “Your credit score still suffers a hit.”
2. “You still might not be off the hook for the balance of the loan.” 
3. “Whether or not the sale is approved is entirely up to the bank...By the time your lender has approved the terms of a short sale, the eager buyer…has likely moved on.”

Massi believes the problem with Home Affordable Foreclosure Assistance (HAFA) is that the homeowner must “first been turned down for the HAMP (Home Owner Affordable Mortgage Program)...(and) By the time a homeowner is in a position to apply for the HAFA…(they) are facing foreclosure.”  If approved, the homeowner has “only 120 days to sell their property,” if no short sale, then it becomes a foreclosure.

Jack Guttentag, the Mortgage Professor, believes that banks would prefer to foreclose on homes than do a modification for five reasons: 

1. “The decisions to reduce principal loan amounts are made by the firms that service mortgages – the same folks who brought the country the robo-signing scandal.”
2. “Banks are in the business of making money.” 
3. “In this economy, you will likely default anyway.” 
4. “Banks are short-staffed and…untrained.” 
5. “Mortgage insurance works against you,” because “Why would a bank do a modification for $15,000 if the $40,000 foreclosure cost is going to be paid by the mortgage insurer.”

This explains why AIG and other insurance companies are paying out millions to banks that got insurance or protections on their mortgage-backed securities (MBS) through credit default swaps (CDS).  Even though, AIG had to sell its own assets of American Life Insurance Company and American International Assurance, to Metlife and Prudential to repay claims from bank's CDS and government bailout.

So, foreclosures is one factor that resulted in Atlanta's lack of tax revenue for schools, which is why DeKalb School board had to increase tax revenues to compensate.  Modification and short sales is another factor for lack of tax revenue, since a less valued home, brings in less property tax revenue.  And with lack of tax revenue, why are we surprised when teachers, police, firefighters and others are losing their jobs.