Saratoga Springs feels pain of housing slump

SARATOGA SPRINGS — Housing slumps hurt almost everybody. In Saratoga Springs, the slump has hit the city a million times.

Saratoga Springs projects a $1 million shortfall in revenue for this fiscal year because of the slowdown in homebuilding.

Ken Leetham, Saratoga Springs city manager, said the city noticed it might have problems with the budget and slowed spending.

"We've curtailed our spending and we've put off several projects that were scheduled to be built," he said.

They halted road projects and put a hiring freeze on open city positions, but haven't yet had to cut any staff positions, he said. The city is still issuing building permits, but those permits have slowed, Leetham said.

"We're at about a third of the level that we were in 2006, which was our highest growth year," he said.

He added, "It's not that people aren't buying and selling homes, (it's that) there's a lot of homes on the market."

Homebuilding creates economic benefits for cities not only during the developing and building stages, but also during occupancy, said Elliot Eisenberg, senior economist for the National Association of Home Builders who has studied Utah County's housing market.

Impact fees for developers to bring electric, water, sewer and cable services to the lot create revenue streams for local governments, as do building fees and money spent by construction workers during the building process, he said.

"That's a tremendous amount of money that comes in on per-house basis, and homebuilding is a base source of local economy," he said.

He added that because construction is such a large part of Utah County's economy, any downturn in the housing market will be noticeable for cities. The markets will eventually come around, but for now local governments are definitely feeling the strain of the downturn, he said.

One problem is the unsold homes on the market, which also causes a slowdown in new homebuilding.

"The builders have some inventory out there and they've got to move their inventory before they start building," said Ron Rydman, community relations director for the Utah Valley Home Builders Association.

Leetham, the city manager, said the market in Saratoga Springs is still strong for the under-$300,000 price range and there is a demand for housing. Although things are tight for the city now, Leetham is optimistic.

"I don't think it will last that long," he said.

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E-mail: csmith@desnews.com