Mr. Connors Speaks----on the "Growth Bicycle"--Update

(This is a section of a memorandum written by Mr. Connors for tonight's Evansville Ctiy Council Meeting--3-14-2006)

The city issued only one building permit during February 2006. It has been a long time since the city issued only one building permit in a month. It appears rising interest rates have discouraged builders from constructing as many “spec” houses as they have during the past few winters. However, if the pace of housing construction returned to the level it was in 1999 through 2002, when the city issued 30 to 40 building permits for new single-family houses, rather than 50 to 70 building permits for new single-family houses, as the city issued during 2003 through 2005, that probably would be a good thing. The pace of residential growth needs to slow down a bit if the city is going to meet its goal of having the population grow by no more than 27% from 2005 through 2014.

It also would be a good thing if fewer of the new houses were “spec” houses and a larger proportion were based on “custom” orders, because “custom” houses tend to be higher valued than “spec” houses. Families that are interested in purchasing higher-value new homes tend to want to be able to customize the house to meet their own needs and desires, rather than purchasing a house that was designed based on whatever the builder thought would be easiest to sell. In addition, the risk involved in constructing a “spec” house encourages builders to make “spec” houses of lower value.

If 2006 were a year of exceptionally low residential growth, it could adversely affect the city’s budget for 2008. Construction during 2006 will become part of the property tax base as of January 1, 2007, which will be the basis for property taxes collected during 2008.

Increased expenditures in the 2007 city budget will be financed in large part by the increased property tax base generated by strong construction during 2005. It will soon be time for me to start working with the department heads to prepare the 2007 city budget.

cc: Department heads

City attorney

City engineer

City planner

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