US state and local-government property tax collections dropped in the last three months of 2010 by the most since home prices peaked more than four years ago, slowing the overall growth in revenue for cash-strapped localities. Real estate tax collections, a major source of income for cities, counties and school districts, slid $5.3 billion (Dh19.45 billion), or 2.9 per cent, from a year earlier to $177.1 billion, the Census Bureau reported. Municipalities took in all but $3.7 billion of the levies collected. The drop exceeded a 2.5 per cent decline in the first quarter of last year, the data show. After the housing market peaked in 2006, property tax income continued climbing until last year because of the lag between when prices change and when values are reset by local authorities. That will make 2011 the most difficult year yet for local governments struggling to balance budgets weakened by the deepest recession since the Great Depression, Moody\'s Investors Service said this month. \"When you do see a decline in property tax, that\'s a pretty strong trend,\" said Phillip Vidal, a statistician at the Census Bureau in Suitland, Maryland. Brighter for states State and local revenue including property, sales, income and other taxes grew 1.6 per cent in the fourth quarter, the Census Bureau reported, less than in the previous two periods. Localities will face financial pressure even as the outlook for states brightens, said Donald Boyd, who follows revenue trends for the Nelson A. Rockefeller Institute of Government in Albany. State revenue rose 6.7 per cent in the fourth quarter from a year earlier as income taxes and sales levies gained. \"The worst on the revenue side I think is over for states,\" Boyd said. \"There\'s plenty of bad news yet to come for local governments.\" Ebbing property taxes may affect the credit ratings of some bonds sold by cities, counties and school districts.