But the half-percent cut in the federal lending rate announced last week buoyed hopes for a turnaround in the housing market.
County leaders disagreed on whether residential construction would approximate levels of recent years in the foreseeable future.
Despite prospects of lower interest rates, Supervisor Jack Sweeney said, "They have taken away the major incentive that built houses in the county, and that was an amortized loan for five years. That's not going to happen now ... We're going into a new housing market era."
Board Chairwoman Helen Baumann was more optimistic, saying that the market seems to be leveling off. "I'm not sure there is long-term potential doom and gloom," she said.
Based on updated revenue projections, Development Services Director Greg Fuz proposed during a Sept. 17 budget hearing to reduce the 2007-08 appropriations for building services by $1.05 million through staff cuts.
"In the last 2 1/2 months, we will have lost 23 people in the department, if you go with what we propose," Fuz told the supervisors.
Although overall demand for building services for home remodels and commercial development remains high, Fuz said two-thirds of the department's revenue comes from permits for new home construction.
The proposed budget in June sought to bridge the gap with a combination of permit fee increases, staff reductions and a supplement from the county's general fund. But Fuz said the decline in new home construction is greater than anticipated.
He said the county issued 442 permits for new single-family houses during the first eight months of the current calendar year, compared with 1,008 during the same period in 2006.
Terri Knowlton of the county chief administrator's office said the latest revenue assumptions are based on discussions with members of the county Assessor's Office, as well as the Development Services and Transportation Departments. She said they looked at historical trends since 1987, when the last major decline in building activity occurred.
She also noted that 1,350 residential lots are to receive final maps by June 2008, and a number of development agreements are about to expire.
With that in mind, she said, staff members project 600 permits for new single-family dwellings will be issued in 2007-08, with 300 of those in El Dorado Hills and 300 in other west slope communities. That number is expected to increase to about 750 in 2008-09, 1,000 in 2009-10 and 1,200 in 2010-11.
"We anticipate 1,200 (new housing starts) is sustainable," Knowlton said.
That compares with about 1,880 permits for new single-family homes in 2005, she noted.
The board agreed to provide Building Services with an additional $450,000 in general fund monies to cover activities associated with home construction following the Angora fire near South Lake Tahoe.
Transportation director Richard Shepard said new home construction also affects funding for road projects. Under Measure Y, approved by county voters in 1998, developers must pay for road improvements needed to serve growth.
The traffic impact mitigation fee currently ranges from $13,670 to $37,000 per single-family home, depending on location. The board was scheduled today to consider boosting the fees 15 percent to keep pace with rising road construction costs. Shepard said he will seek the board's direction as he updates the five-year capital improvement program early next year.
Under a conservative scenario that assumes no economic recovery with 600 new homes built in each of next five years, some projects included in the current $840 million five-year capital program would have to be postponed, he said.
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