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Lower tax collections, higher foreclosures haunt budgets
While foreclosures seem to be leveling off, the overall effect during last year pulled down the entire housing market. In Hall County, construction is still at a standstill, but that may be good news for homeowners who don’t want to compete with new construction when selling their home. - photo by Tom Reed

In 2009, the economy was on everyone’s mind.

It was the nagging concern throughout the year that left people praying to keep their homes, businesses hoping to keep their doors open and government officials scratching their heads as they wondered how to balance budgets for the year ahead.

Local governments have fought the financial crisis a little more gracefully than some, but low tax collections were a major hit to government coffers.

While many started to look at furloughs early in the year, the city of Gainesville maintained relatively normal operations through much of 2009.

The city steadily made cuts in an attempt to keep the economic conditions from impeding on employees’ take-home pay.

But it was announced in November that city employees, who have gone without annual raises for two years, would be required to take one unpaid furlough day each month.

It was also a tough year for Hall County government, which went the whole year with monthly furlough days, hiring freezes and other measures to stay afloat financially as revenues steadily declined.

“Our main volatile revenue source at least in the general fund is sales tax,” said Assistant County Administrator Phil Sutton. “Sales tax had dropped four quarters in a row.”

But few had bigger budget woes than the state in 2009.

At the beginning of the General Assembly, the task at hand was to reduce the budget by $3 billion, cutting across the board.

State departments and agencies on average were forced to reduce spending by an average of 5 percent as the months went by and tax collections continued to come up short.

By July, Georgia’s spending was at the level it was in 2005, when the state had about 1 million fewer people.

The state cuts hit local school systems especially hard.

The Hall County school system sustained $5.6 million in cuts in fiscal year 2009 and would have been forced to make more cuts without the help of stimulus funding. Roughly $9 million in cuts have been announced so far in fiscal year 2010, which began in July.

The Gainesville City school system was also aided by stimulus funds to end up with $600,000 cut in 2009 and $1.5 million in cuts since July.

While much of the year has been bleak financially, the end of 2009 has given many hope that things are starting to look up.

The county still has a positive fund balance and is beginning to see small signs of improvement as sales tax collections improve slightly.

Sales tax revenues went up 7 percent from the second to third quarter of 2009.

“It looks to me it’s at the very beginning stages of turning around,” Sutton said. “It’s going positive from a very low revenue situation, but it’s beginning to make the turn without question.”

The modest gains are a step in the right direction, but many say the thing to keep an ear out for is the sound of hammers hitting nails.

“Really until housing starts to come back I don’t see us making a full recovery,” Sutton said.

Local real estate executive Frank Norton Jr. said he thinks when Lake Lanier started to fill up this summer, the housing market also got a boost.

“It increased consumer optimism both on and off the lake,” Norton said. “At about the same time the lake started to go up midsummer, we started to see a renewed confidence in housing.”

Before July, most houses that changed hands were less than $200,000. Through December, sales of homes in all price ranges improved.

Foreclosures have also started to level off, Norton said, but construction is still at a halt.

“There is relatively no new construction going on in this county, which is a good thing,” Norton said. “Because people who are reselling their house aren’t having to compete with the foreclosures or new homes, they’ll start seeing their prices stabilize and start to go back up.”

Norton said just as the slowdown of the housing industry foretold the collapse of the economy, the return of a stable housing market should mean a healthy economy is not far behind.

“If we can get the housing industry started back up ... we should see some overall employment gains and the return of some degree of consumer confidence,” Norton said.