Concord’s tax base grew far less than city councilors had counted on when they approved a roughly 3% increase to the tax rate in June, leaving city coffers short of their goals.
The budget shortfall means the council will have to either find reductions, take another bite out of the city’s reserves, or up the tax rate even further to make up the difference. At the council’s meeting on Tuesday, it’s slated to do all three.
When pressed by constituents about rising local taxes, city leaders often point to an expansion of the tax base as the solution. Most people don’t want a reduction in services, the argument goes, so the city should focus on bringing in more revenue to lessen the pressure on homeowners. Growing the city’s tax base is a central way to do that.
However, the city’s expenses are outpacing the growth of taxable property.
Concord has a net property valuation of about $5.3 billion after tax-exempt land is removed. If that grew by 3%, Concord would have needed to add more than $150 million in new value over the last tax year.
Concord added about $34 million in new value last year, which fell short of the $47 million in growth that was estimated.
Another whammy hitting the city is the loss of $17.8 million worth of property value that became tax-exempt, the report states.
- The state of New Hampshire bought the large office building at 1 Granite Place, carrying nearly $11 million in assessed value.
- The city itself purchased the former Concord Insurance Group property at 4 Bouton Street for a new police headquarters, which had $3.3 million in taxable property value.
- Properties bought by nonprofits Riverbend Mental Health and Next Step Living, residences set aside for adults with intellectual disabilities, together had a value of another roughly $2 million.
The city lost another $5.9 million from new low-income housing tax credits at several new affordable housing developments, including the Railyard Apartments and Rosemary’s Way.
If the city relied only on the tax rate to make up the difference, what was originally pegged at a 2.95% increase would end up as a 3.76%, the report states.
As a result, councilors are set to approve tweaks to the budget at their meeting Tuesday night. The changes include: a reduction in the amount of tax abatement overlay set aside, a $176,500 drop in wages, and an increase in the amount of cash reserves to offset the tax rate.
The report doesn’t say where those wage reductions will come from.
Councilors have already put more than half a million dollars in rainy day funds into the budget.
Concord has carried large surpluses in recent years, and as a result has an unassigned fund balance far larger than the state department of revenue deems necessary.
At the same time, cushioning spending with reserve dollars is risky: using one-time funds, like grants or reserves, to plug recurring expenditures can create a budget imbalance that could lead to tax rate spikes in future years, especially if slow growth persists.
Separately, Councilors will hold a public hearing to increase the tax rate to cover $260,000 in new compensation costs tied to a new contract with the firefighters union, though the council agenda doesn’t include details about how much the tax rate will have to be increased to cover it.
The sluggish growth affected the school district, too.
Concord’s School Board is also crunching numbers on less revenue than planned. Compounding the math are two surprise bills that the district has no control over – millions of dollars in unexpected health insurance and special education costs that it has little choice but to pay. But the district’s reserves alone can’t shoulder the shortfall, and the school board is leaning toward a further tax rate increase.
