When you buy a home, you're also investing in the community, so it's important to know whether it's a well-run municipality or a city on the decline.
Local governments, in addition to being among the nation's largest collective employers, are also among their region's top revenue generators, according to National Bureau of Economic Research data. Denver's revenues are close to Molson-Coors, the second largest U.S. brewer.
More relevant to Denverites than Molson-Coors' latest brew is how well their city spends on the services: libraries, parks, garbage pick-up, police, roads, public transit. Is the city investing in these community building blocks or making cuts? Is it spending more than it collects? What's its fiscal outlook?
All of these factors help tell you how well a city is run and, by extension, whether such services will enhance a house's value, or detract from it.
Population growth — and whether new jobs are high- or low-paying — affects the rate of increase in city expenses and in revenue. If personal income growth outpaces population growth, that's good for the local government's financial health. On the other hand, smaller, poorer cities tend to see their expenses grow faster than revenue.
Another budget strain is debt. For instance, Denver's annual interest payments on debt have fallen, while in Sacramento, Calif., annual interest payments more than doubled. Scrolling through local headlines tells us that Sacramento's annual debt payments are poised to take a larger and larger bite out of the city budget in the coming years. In other words, more city spending is going toward paying for past investments (or expenses) rather than generating new growth.
Putting this all together, we get a picture of how local government spending has a direct impact on residents' quality of life and the overall economy. A reduction in services usually means budget pressure, so it's also worth investigating whether property taxes — Denver's are unusually low — and other levies and fees have been rising, or if that's being considered.
If you're looking to buy a house, chances are you've set a budget and spent countless hours researching the possibilities. Set aside a little of that time to make sure your chosen community is also an investment you're willing to make.
