Real estate woes add to deficit

Following the nationwide trend of struggling housing markets, Prince George's County and the City of College Park are facing further economic uncertainty that can be attributed to ailing real estate.

In addition to shouldering about a $700 million debt, the county faces a $133 million budget shortfall for the 2013 fiscal year, according to Thomas Himler, the county's budget director. A struggling real estate market and lower assessed values on property are two contributing factors to this gap in revenues and expenses, Himler wrote in an email. Many officials said they do not see the problem fixing itself anytime soon.

Thus, the county will need to cut spending and explore new options for raising revenue next year — difficult decisions county officials will need to make in the coming months, Himler wrote.

"We expect future budgets to be challenging due to limited revenue growth and expanding service needs and costs of providing such services," he wrote.

Although the depreciation of housing values in the city ultimately affects the county's overall deficit, the university's presence — as well as its large number of employees — has lent a hand in assisting the area's economy, according to Himler.

Every three years, the state's Department of Assessments and Taxation assesses the property values of homes — the city is in the second year of this cycle — and the city will collect a small portion of that value through real property taxes. Real property tax comprises 52 percent of the city's revenue, city Finance Director Stephen Groh said.

Although the city expects to pick up $262,000 in new revenue from The Varsity apartment complex's property assessment, development projects of this magnitude are few and far between in the near future.

"There's nothing else in the pipeline," he said. "There are no new projects anticipated to open in the next two years."

Cliff Rossi, a teaching fellow at this university's business school, said he does not expect the housing market to get better anytime soon and anticipates further uncertainty in the coming years.

"We will continue to have very, very weak home prices for quite some time," he said.

An increase in the supply of housing due to foreclosures combined with a decrease in demand due to uncertainty from potential homebuyers will further depreciate housing values and make it harder for the county to close the gap in the budget, he said.

"I wouldn't look for the county to make up a shortfall anytime soon based on home price appreciation," he said.

However, the city has a balanced budget for the upcoming fiscal year, according to Groh. He added that the county's climbing expenses for public safety and education make it harder to balance revenue and expenses.

"The county is so big that they have a lot of costs that we don't have."

bach@umdbk.com