Bank Foreclosures Hit City

The game is not just between lenders and borrowers but it has spilled on beyond the courts to affect entire Pawtucket. The city is paying the price for borrowers being unable to cope with rising interests and falling into the jaws of bank foreclosures. A chain reaction has set in.

Taxes are not coming in because once a default notice is issued the foreclosed house owner is not liable to pay taxes until the matter is resolved. Most of the lenders are banks but the latter are also exempted from paying tax dues until the foreclosed property has been sold and a deed has been recorded. At that juncture the new owner has to pay all arrear taxes. But till then the property rests in a state of limbo while the tax kitty gets lighter and lighter.

This has resulted in a serious cash crunch for Pawtucket with a $1 million deficit. There has been a drop of revenue for various reasons, to the tune of $905,494. Of this figure, foreclosure accounts for a loss of $486,138. The number of units repossessed by banks has gone up three fold from 65 in 2006 to 172 in 2007. Till 2004 foreclosures were hardly known. There were only 3 foreclosures in 2004 and 17 in 2005. Now 3 to 4 are being registered each day! City officials say that the $1 million deficit is also largely due to over spending. The fire department is coping with huge overtime bills. But the major reason for revenue shortfall is foreclosure. Collection from property taxes has sharply gone down. The stagnation in the purchase and sale of property has also led to a shortfall in taxes. Real estate transfer fees are not coming in – a reflection on the health of the market. This year’s deficit follows close on the heels of the previous year’s shortfall. The last shortfall was made up by taking from the unrestricted reserve fund but now the level of that fund has sharply fallen. This has caused city officials to become extra careful about spending even if the head has been included in the budget. This is affecting welfare schemes. It has come down to small matters like getting budgetary approvals for a new computer or a set of tyres for the civic body! How far counting pennies will go is a matter of conjecture and surmise.

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