The property tax rate for the city of Concord will go up again, after costs from a new firefighters’ contract and slower-than-expected growth in the tax base left the city with a shortfall.
The city estimated in June that the net citywide property value would go up $47 million. That figure underwrote the amount of property taxes councilors expected to collect. In reality, growth fell far short of that.
Ward 5 Councilor Stacey Brown had questions.
“I’m wondering how we didn’t see this coming,” Brown asked, curious how the city’s projections could have been so far off.
In part, that was because of land taken off the tax rolls.
The State of New Hampshire bought a large office building from developer Steve Duprey, pulling its millions in value from the tax base. The city itself also bought an office building from Duprey, the former Concord Insurance Building planned to partially house a new police headquarters.
“You can’t stop people from selling property to the state of New Hampshire,” City Manager Tom Aspell said in response to Brown.
Land being sold to non-profits and governments is a norm in the state capital – but Brown wanted to know why the city didn’t account for the purchases it would have known about well in advance of drafting the budget.
The Granite Place purchase had been sewn up for more than a year before councilors voted on the tax rate this June. In the case of the police station, the city council itself had voted on acquiring the building a year and a half beforehand.
“I’m just surprised we didn’t factor in the police station,” Brown said. “We knew Mr. Duprey was going to be selling.”
Aspell said that the limited property value growth was also due to multiple affordable housing projects in the city.
“If the city’s going to try to support affordable housing,” he said, “this is what happens when people file for these agreements.”
Two housing projects, the Railyard Apartments in the South End and Rosemary’s Way in Penacook, use federal Low-Income Tax Credits and a corresponding state program that assigns a lower property tax obligation.
These projects had to apply for these credits a year ago.
Even without these exemptions, growth in Concord would have fallen well short of the city’s projection in June.
To make up the difference, councilors leaned on an additional $105,000 in reserve funding and approved about $176,000 in wage reductions suggested by administration, pulling from the community development, library, finance and general services departments, among others.
Firefighter raise
Like other city unions over the last year, firefighters negotiated a higher annual raise in their new contract this summer. After prolonged negotiations with the city, the contract wasn’t complete until after the city budget had been set.
While the budget held some cushion for a wage increase, according to Aspell, it wasn’t enough to cover the new contract, leading to the new expenditure approved Tuesday night. It will add another .5% increase to the tax rate, bringing the total municipal tax increase to 3.45%.
Brown wondered if the council could pay for that increase with reserve money, instead of raising the tax rate beyond the 3% they’d spent hours debating back in June.
Previously, they had voted to fill the shortfall with a combination of reserves and cuts, she said. Why couldn’t they take the same tack with this new expense?
“I don’t think it’s a good practice to use your savings account to pay operating expenses,” said At-Large Councilor Nathan Fennessy. “This is wages that we negotiated. We understood that there would be an additional economic impact as a result.”
Using one-time funds like savings or a grant on a regular, recurring expense creates a budget imbalance: deflating the tax rate for one year and leading to a spike in a future one when that money is not in play.
However, in June, the council agreed to apply $550,000 from their rainy day fund towards operating expenses. They added $105,000 to that total as a result of the shortfall Tuesday night.
Covering the $260,000 in firefighter wages with cuts elsewhere, rather than a further tax rate increase, wasn’t discussed.
ADUs
Councilors approved a new rule allowing detached accessory dwelling units – or in-law apartments separate from a main house – as required by a new state law.
They affirmed a planning board decision to not require that the landowner live on properties with ADUs, though not without fierce reservations from Councilor Judith Kurtz about potential abuse of these housing units as short-term rentals.
To Kurtz, an owner-occupant rule would be a “necessary safeguard” against “letting those properties be bought up by out-of-staters who will then flip them both, and rent them to folks without any care about what happens in our communities.”
To other councilors, it would have meant adding housing restrictions to a measure designed to relax them, especially given that Concord, with its healthy stock of hotels and few destination attractions, hasn’t seen a widespread swell of short-term rentals.
“I would be reluctant to try and impose barriers at this point to try and solve a problem that we don’t have,” Fennessy said.