Let the worrying about the next round of budget talks for Douglas County governments begin.

New numbers about the county’s real estate scene are leading to predictions that the popping of the national housing bubble finally will start to let some of the air out of Douglas County property values.

“I don’t think there is any maybe about it,” said Douglas County Administrator Craig Weinaug. “I fully believe that our property tax base is going to decline.”

Weinaug isn’t predicting a large-scale drop off — not the 20 or 30 percent type of declines seen in many housing markets across the country — but he does think Lawrence and Douglas County’s assessed valuation could fall by 3 percent to 4 percent. That would be the largest decline in the county’s tax base in at least 20 years, and it would create budget worries for governments that rely on property taxes.

“A 3 or 4 percent decline in our tax base will result in a $3 million or $4 million loss in revenue for the county’s budget,” Weinaug said.

Weinaug said that will lead him to ask Douglas County commissioners to start making tough budget choices sooner than normal.

“I’m already asking them to think about what priorities they want to set,” Weinaug said. “To what extent are you willing to cut services? To what extent are you willing to raise the mill levy?

“Instead of asking questions in April and May of 2012, I’m starting to ask those questions now because we may need some time to phase in some changes.”

Numbers to watch

Two sets of numbers have caught the attention of local leaders. The latest report from the Douglas County Appraiser’s office found that the average selling price of homes in Lawrence and across the county had fallen by 11 percent, and now stood at $173,040.

The average selling price of homes hasn’t been that low since about 2006. There are caveats to the data. The numbers are only through August, and a staff shortage hasn’t allowed the office to review as many sales as they normally do.

But still, Douglas County Appraiser Steve Miles said the numbers were worth watching.

“Those numbers did surprise me a bit,” Miles said. “We haven’t seen many declines quite like that.”

A less-dramatic set of numbers, but perhaps a more reliable set, come from the state’s recent review of the Douglas County Appraiser’s office. The state’s annual sales ratio study of the appraiser’s office found that in 2010 the taxable values set by the Douglas County Appraiser’s office were about 1.2 percent higher than what selling prices suggested they should be.

The finding — although the county is still well within the regulations set by the state — does create some concern for Miles. Historically, the report has found the county to have slightly under-appraised the market. In 2006, the study found that tax values were about 5 percent below what selling prices suggested they should be. Since then, the number has been on the rise. Miles said that if the county is going to be off one direction or another, he would rather err on the side of being slightly below what selling prices suggest the values should be.

“With the way the markets and the economy are going right now, being a little above is not where you want to be,” Miles said.

The fact that the state’s report was based on 2010 sales is also causing some local leaders to believe values will have to go down because it is generally believed the real estate market in 2011 is slower than it was in 2010.

That’s why Weinaug is guessing a 3 percent to 4 percent drop in values is likely. Miles, however, said he is not willing to make a prediction yet. He said he’ll be in a better position to offer guidance by mid-November when his staff gets caught up on analyzing sales that have occurred in 2011.

Basically, what Miles finds in the next few weeks will be important for cities, school districts, the county and other governments that rely on property taxes.

“Even though most people think I figure out what the budget needs to be and then I tell the appraiser what the tax values need to be, it doesn’t work that way at all,” Weinaug said. “Our property tax base is going to be determined by what happens in the marketplace.”

City Hall impacts

Lawrence City Hall leaders also are bracing for a decline in the city’s property tax base. But the financial impact on the city would be a little less than it would be on the county because the city has become more reliant on sales tax collections.

The same 4 percent decline that would produce a $4 million decline in revenues for the county would produce about a $1 million decline for the city. But some areas of the city’s budget would be hit harder than others. Funding for the Lawrence Public Library is dependent on property taxes, so a drop in the mill levy could make it more likely that library leaders would ask for a larger-than-expected mill levy increase to fund the operations of an expanded library approved by voters last November. The city’s bond and interest fund — the account the city uses to make its debt payments — also is heavily dependent on property tax revenues.

City Manager David Corliss said a one-year decline in the property tax base will force some tough decisions but won’t be devastating to the city’s operations.

“It is not too unexpected,” Corliss said of a drop. “We have enjoyed some good stability during this downturn in the economy, so I wouldn’t be too surprised to see an adjustment occur.”

The big question will be whether the declining property tax base just will be a one-year occurrence. Weinaug, at least, said he thinks it is possible the county could see a decline for a few years.

“I can’t make an accurate prediction on that, but I’m not counting on or expecting the real estate values to suddenly start going up again,” Weinaug said. “Whether that decline continues at 1 to 4 percent a year, I don’t know. I’m certainly not counting on real estate values to just turn around.”