Home foreclosures could decrease municipal tax base by $356 billion.

• Position: News & Numbers - Report

One in 33 homeowners is projected to be in foreclosure in the next few years because of subprime loans made in 2005 and 2006, according to a report released in mid-April by The Pew Charitable Trusts. Municipalities could see a collective decrease in their tax base of up to $356 billion, mostly over the next two years, as a result of subprime loans made in 2005 and 2006. As a result, cities across the country could lose billions in taxes and revenue from A lost fees for services (e.g., permits, water, garbage pickup provided by the public sector), according to data cited in the report, Defaulting on the Dream: States Respond to America's Foreclosure Crisis.

One analysis cited by the report projects that foreclosures will decrease property values by $519 billion in 2008. This decrease could lead to a serious drop in revenue for state and local governments that rely heavily on property taxes, real estate fees, and sales taxes. The same study estimates that 10 states alone will lose a total of $6.6 billion in tax revenue in 2008.

State and local officials need to consider strategies to directly manage the...