Local governments in Douglas County are preparing to deal with a 3 percent decrease in property valuation as they work on their budgets for next year.

“We’ve always said the 2011 budget year was going to be the most challenging one for us,” said Douglas County Administrator Craig Weinaug.

The revenue projections are based on early estimates for county property values as the appraiser’s office has finished protest hearings. Weinaug said the property tax revenue estimates still could change based on items that are state-assessed, like railroads and public utilities.

The reduction could be a good news, bad news story.

For one, it could have been worse. Last year during the depths of the recession county officials were warning about a potential 7 percent to 8 percent decrease.

“By the time the end of the year came around, sales had done a little better than we anticipated,” Douglas County Appraiser Steve Miles said.

Miles credited the federal homebuyer tax credit with helping boost residential home sales toward the end of the year.

He said most residential properties valued from $150,000 to $300,000 mostly stayed the same, but homes valued at more than $300,000 saw more decreases in value than the midrange ones. The county’s commercial and industrial properties stayed roughly the same in value.

The valuation has dropped another 1 percent because of appeals, Miles said.

A 3 percent decline in assessed valuation would still be the largest in the county’s tax base in at least 20 years.

It will complicate the summer budget process for local governments because it means their current property tax levels won’t raise as much revenue as last year.

Weinaug said Douglas County commissioners will face a decision about helping some social service agencies that have recently lost funding because of state budget cuts.

Rick Doll, Lawrence schools superintendent, said Friday it will bring a challenge for the school board because it has already cut $4.6 million for next year because of state-funding reductions.