SPRINGFIELD (July 30, 2008). Figures released by the Capital Area Association of REALTORS® (CAAR) reveal that the proposed move of 140 jobs from the IDOT Traffic Safety Division out of Springfield to southern Illinois would be extremely costly to this community. CAAR’s analysis reveals that In terms of the impact on residential real estate the move will result in a potential loss of over $8 million dollars during the first year. The analysis further shows that the impact of this move when compounded over fifteen years becomes extremely sizeable at over $21 million dollars.

These estimates are based on the assumption that 140 jobs and/or employees will leave this community. Of the 140 employees, it is estimated that 70 percent own homes, resulting in 98 homeowners and 42 renters. With 98 homeowners and using the 2007 median home sale price of $104,500 there will be a loss of over $10.2 million in residential real estate investment in this community. Based on the average cost of rent of $579.00 for a two-bedroom apartment the annual loss of rental income alone will be nearly $300,000. The annual loss of property tax revenue to schools and local governments will be over a quarter of a million dollars. Ironically, there will be an initial economic stimulus of $2.7 million resulting from the sale of 98 homes, assuming, that is, that they will be able to sell. The end result will be a potential short term net loss of over $8 million.

When taken over a fifteen-year time-frame this analysis shows that the economic impact of this move will result in a potential loss of over $21 million. This includes a $10.2 million loss of investment in residential real estate, $3.8 million in lost property tax revenue and $4.3 million in lost residential rental income. Finally, since homeowners move every six years on average, it is assumed that these homeowners would have “turned over twice” resulting in a loss of economic stimulus of $5.4 million. The net loss of economic stimulus from lost future home sales would be $2.7 million after backing out the initial positive stimulus provided in year one.

Chiles said that this move will cause the commercial real estate market to suffer. “The commercial office market has already suffered greatly due to continued downsizing of state government. The loss of approximately 3,000 government jobs locally in the past few years, among other things, has had a significant impact on the health of commercial real estate. A reduction of 3,000 employees has resulted in an estimated corresponding reduction of 600,000 square feet of office space. This amounts to an estimated loss of $8.4 million in rent at the market rate of $14 per square foot. This problem has been compounded by the fact that the state has begun a new trend of purchasing buildings including the Department of Natural Resources Headquarters building as well as the old AIG building. This not only results in the reduction in the demand for privately held office space but it takes property tax revenue away from local government, as there is no property tax levied on state owned property. Additionally, this glut of office space created by government downsizing has also contributed to keeping lease rates at about the same level for the past 20 years,” said Chiles.

“The financial impact of this proposed move on our community is damaging enough. If only it stopped there, but it doesn’t. The Governor has made it known that he intends to pursue more of this ‘economic redistribution’. This type of talk has resulted in a great deal of uncertainty in our local real estate market. Many government workers are nervous about their future. They worry about whether their agency, department or unit will be next and, if so, what will this mean to them. They wonder whether they will have a job twelve months from now or be forced to uproot their families as well,” said Chiles.

Chiles commends the Governor for recognizing the need for economic development in this state but says that “what the Governor fails to understand is that all areas of this state need economic development opportunities,” said Chiles. “We all know what this move is about and it’s not about better serving the public or saving money,” said Chiles.

The Capital Area Association of REALTORS® is the Voice for Real Estate in the Capital Area representing more than 700 members involved in all aspects of the real estate industry. The Capital Area’s Resource for Real Estate Information can be found at www.SeeHouses.com.

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