11:09 PM PST on Saturday, December 19, 2009

Sacramento Bureau

SACRAMENTO – Inland cities and counties have been hit with a one-two punch of falling sales tax revenue and a widespread drop in property tax receipts.

The two are the biggest sources of money for parks, public safety, libraries, homeless services and other local programs. Inland officials planning next year’s budgets are weighing salary freezes, service cuts, layoffs and other measures to deal with the downturn in revenue.

Late last month, the state Board of Equalization notified 535 cities and counties that they would be getting smaller sales tax allocations than had been projected because of the steep drop in taxable sales.

Soon after, the board signaled that it will tell county assessors to reduce assessed property values for the first time ever.

Hundreds of thousands of properties in Riverside and San Bernardino counties already have been temporarily reassessed downward because they are worth much less than what they sold for.

“We’re getting a double whammy,” said Michael Coleman, a fiscal adviser to local governments.

The state’s massive fiscal problems stem from a huge drop in money from the personal income tax, as well as declines in sales and corporation tax revenue.

Local governments have a different revenue mix. Sales and property taxes are their bread and butter.

In the Inland area, car dealerships, construction-related businesses and other retailers have been hit hard by the recession.

Taxable sales fell by some of the highest rates in the state during the third quarter of 2008 compared to the same period in 2007, according to the most recent state data available.

Riverside County’s taxable sales dropped from $6.9 billion in July-September 2007 to $6.3 billion in July-September 2008, an 8.7 percent decline.

San Bernardino County’s taxable sales during that time declined from $7.5 billion to $7.04 billion, a 6.1 percent drop.

Some cities have had particularly steep declines. Norco’s taxable sales, for example, fell 15.5 percent, from about $130 million in the third quarter of 2007 to about $110 million in the third quarter of 2008.

The state distributes sales tax revenue to cities and counties before getting the final numbers by relying on historical trends and other data.

In recent months, the state has cut those allocations — sometimes significantly – because taxable sales were falling so fast, according to Board of Equalization data.

Paul Sundeen, Riverside’s chief financial officer, said city sales tax revenue from July through September was down 17 percent, for a $2 million hit to the city budget.

The main causes were a drop in sales of construction-related goods and cars, even with the federal government’s Cash for Clunkers program, he said.

Next month, the Riverside County Board of Supervisors will decide what to do about a $10 million drop in money from Prop. 172. The 1993 measure devotes some sales tax revenue to district attorney’s offices, sheriff’s departments and other public-safety agencies.

Property taxes down

To read entire story click here.