Part 1 of 3
(About this series: The burden on New Hampshire property owners to pay their taxes is growing. Over the past decade, median income is down and taxes are up. In a three-day series, the “Monitor” has looked at how this tax tension is playing out across the state, and what happens when people fail to pay. To read all of the stories, go here.
Database: Find out how much taxes have increased in your town since 2009 by searching a database at the bottom of this story. )
One of the costliest bills New Hampshire homeowners pay each year comes due about now. The typical taxpayer will fork over about $2,500 for mid-year property taxes – but some others won’t be able to afford it.
For those who let the deadline slip for the first time – perhaps due to an unexpected medical bill or the loss of a job – it’ll start a three-year clock until their city or town can seize their home for the unpaid debt.
That’s an outcome most everyone hopes to avoid. But the reality is that the middle-of-the-road worker’s paycheck doesn’t go as far as it did 10 years ago, the tax burden is increasing and the cost of living in the Granite State is high and rising.
The tax situation is worst in those cities and towns where there are few commercial business to help homeowners pay for police, fire departments and schools. This year in Franklin, for instance, 80 homeowners are eligible to have their properties seized for back taxes, the highest total in the city manager’s memory.
Franklin officials have worked out payment plans to help the vast majority of struggling taxpayers recover without losing their homes, but still, at least 15 households could forfeit their most valuable asset.
Compared with some other states, the picture for New Hampshire’s workers isn’t that bad. They’re paid relatively well and their taxes are generally low. But other places collect more tax revenue and distribute more money per student to school districts – the major expense of most communities – while New Hampshire residents pay much of that cost at the local level through their property taxes.
For most people, it’s getting harder to pay that bill. Since the Great Recession, the median wage has fallen compared with inflation. And the median property tax rate in Merrimack County has increased 25 percent in that same time, according to figures from the Department of Revenue Administration.
“The property tax bill starts to put pressure on the family’s ability to pay for everything else, because the income isn’t going up,” said John Tobin, interim executive director of New Hampshire Fiscal Policy Institute. “It deters people from buying a house and it also makes it harder for people to hang onto the house.”
Recovery for some
By some measures, the state’s economy has recovered well in the past few years. Unemployment rates are nearly down to where they were before the recession, and the total wages paid to all workers are above pre-recession levels.
But those who earn the highest wages have fared far better than those at the bottom, so an overall increase in wages doesn’t necessarily mean anything for the typical person’s livelihood. Adjusted for inflation, the median hourly wage in the state fell nearly 7 percent between 2007 and 2015, according to an NHFPI study.
That was felt nationwide, but the decline in median hourly wages was sharper in New Hampshire than all but one other state.
No one knows for sure why the benefits of economic growth have been isolated at the top, NHFPI Policy Analyst Greg Bird said, but at least one factor in New Hampshire has been the recomposition of employment, especially the evacuation overseas of well paying manufacturing jobs.
“If you have a manufacturing job, you’re probably doing quite well. The question is: Do you still have it?” Bird said. Those jobs have been replaced by lower-paying industries, such as administration and support services and accommodation and food services, he said. “This is the barista economy. All the college-educated students are working at Starbucks.”
Many of the cities and towns languishing under diminished property values are feeling the loss of manufacturing jobs twice over, once for the reduced commercial tax base and once more for their underemployed residents.
Hard hit areas
Because New Hampshire pays for its schools locally and raises so much of its money through property taxes, some areas have a worse burden simply because of their geography.
Districts pay to educate their children by taxing their constituents – but whether they have lots of valuable property in town or not, the cost of education doesn’t change. Tobin, the NHFPI director and former head of New Hampshire Legal Assistance, pointed to Allenstown as an example of a loser in the property tax equation.
The town administrator there, Shaun Mulholland, said 51 percent of the land in town is part of Bear Brook State Park and therefore will likely never generate any taxes. The mills that formed the early identity of the rural, riverside town of about 4,300 people are reduced to a “skeleton crew.” And many residents live in manufactured homes, which have lower assessed values relative to permanent homes.
Overall, the property value in Allenstown is lower than that of neighboring Chichester, for instance, despite Allenstown’s population being nearly twice as large. It’s also valued less than a quarter as high as seaside North Hampton, which has the same population. The owner of a $200,000 home in Allenstown can expect to pay about $6,500 in taxes, the highest rate in Merrimack County.
Still, Mulholland said he expects the town won’t have to take any houses by tax deed this year, a development that he credits to early interventions with delinquent taxpayers.
“When we issue the tax liens” early on after a bill isn’t paid, “we tell folks come in and request a tax payment plan,” he said. “That effort, I think, has a lot to do with why we don’t have as many properties up for deed.”
Of the 13 properties eligible to be taken this year, he said, most are on a payment plan. One of those homeowners, Sarah Gendron, said she’s paying $200 a month to catch up after her mortgage company failed to follow through on its responsibility to pay the property taxes out her escrow account.
She said the town has been helpful in working with her, but she’s not sure how to bring the tax burden down.
“I don’t know. I really don’t know,” she said. “We need more businesses, because that would help the taxes, but the businesses don’t want to set up shop because taxes are so high.”
The spiral of interest
It costs about $61,000 a year for a family of three in the Concord area to achieve an “adequate but modest living standard,” according to the Washington, D.C.-based Economic Policy Institute’s Family Budget Calculator, which studied the cost of living in 618 locations across the U.S.
That assumes roughly $1,000 a month is spent on a two-bedroom apartment and utilities. If that family were to own a home, Tobin said, it could easily pay $800 a month for a mortgage and $500 a month for property taxes, amounting to about a quarter of the family’s budget.
If one worker’s hours were cut during the recession and they’re earning $10,000 less, “they’re still not eligible for any tax relief. But the squeeze is enormous,” he said.
Grappling with reduced income or unexpected expenses, some people may choose to ignore their property tax bill for a time. But after about 30 days, Tobin said, the town can place a lien for the back taxes, initiating interest of 18 percent a year.
“That puts the homeowner in a deeper pit,” because they have to pay not only the delinquent taxes but the interest, too, he said.
“In terms of urgency, it feels, in that moment, less urgent, but once you’re in the spiral of 18 percent interest, it’s hard to get out,” he said.
(Nick Reid can be reached at 369-3325, email@example.com or on Twitter at @NickBReid.)