Rising costs, reduced revenues, tough choices

Talk of tax caps

Taxpayers in some cities, including Rochester and Manchester, are looking at tax caps to try to provide some relief.

Steve Fournier, town administrator in North Hampton, is second vice president of the New Hampshire Municipal Management Association.

"I think all managers and administrators are nervous this year," he said.

"It's a double-edged sword because you have the revenues dropping, and then on the other side, the people are saying, 'You can't increase our taxes.' So the money has to come from somewhere or you have to cut services."

Fournier said that may mean cutting hours for town departments: "It may not be as easy to go get a building permit or pay your taxes or even go to the dump."

And, he said, some towns "will try to defer maintenance for another year until the economy gets better."

In Colebrook, Caron said, the town has level-funded most budget items for the past two years. "But this year," she said, "the fuel oil and the diesel costs have gone up so drastically, there's no way we can try to keep (the budget) down. Yet we've got to."

Colebrook has always been frugal, Caron said; she even buys cleaning supplies at the local dollar store and uses her own car without mileage reimbursement to save the town money. But now she's looking at possibly cutting hours and services to keep the budget under control next year.

The city of Claremont already had level-funded its 2008 budget from the prior year, according to Guy Santagate, the city manager. "I said people can't afford it -- and that's before the downturn -- because I could see this was an issue before the fuel costs spiraled out of control."

For 2009, Santagate is hoping to keep the city's budget to its self-imposed goal of a 3 percent increase. But even that will mean budget cuts, he said; fuel costs alone are already up $200,000 over what was budgeted for this year.

"It's going to be a painful process," he said.

Santagate said his goal is to try to promote new industry in the city in order to reduce the pressure on property taxpayers.

Unpaid taxes

The New Hampshire Local Government Center's Andrews predicts some communities may end up with "default" budgets at town and school district meetings next March, meaning the same level of funding approved the prior year.

"I think it's going to be a difficult time," he said. "Any time you have a bad economy, people look to 'let's save money where we can' and 'where we can' is closest to home."

He also expects some communities may see more residents and businesses postpone paying their property taxes on time, which will make it more difficult for the municipalities to meet their county and school district obligations.

By law, the interest on unpaid taxes is 12 percent a year, Andrews said, which amounts to "a personal or business loan without filling out any paperwork or going through any credit checks."

Taxes have to be delinquent for two years before towns can file tax liens on the property.

Exeter's town manager, Russell Dean, said his town is already seeing more tax liens because of delinquent property taxes. "And that typically hits the lower-income population," he said.

Particularly hard-hit are owners of the more than 1,000 mobile homes in town, Dean said.

"And then you're talking about increasing costs in so many other areas that people are finding it harder and harder to just tread water."

And those costs are hitting the towns as well, he said. "When you combine that with flat values and a downturn in your local revenues, it makes it quite a challenge."

So what will he do?

"Well, you sharpen your pencil and you start looking under every rock for things you might be able to defer in different ways," he said.

Difficult choices

Dean Shankle, Epping's town administrator, said small towns don't have a "whole lot of leeway" in their budgets. But, he said, "when people's personal situations are getting hard, they don't really want to see their taxes go up."

He already has asked department heads to put together "maintenance" budgets: "In other words, no new programs, just do what you've been doing and tell us what that's going to cost, and we'll go from there."

Brian Gottlob of PolEcon Research in Dover says it will take "creativity" on the part of town leaders to balance fiscal concerns with providing the services and amenities that folks consider important.

"There's also the risk that you can eliminate what makes a town a place where people want to live, and that will erode your tax base," he said.

G. Philip Blatsos, commissioner of the Department of Revenue Administration, said he would offer the same advice to local communities in tough economic times as he would in fair: "Keep an eye on your revenue sources and act prudently with that eye."

Candia Selectman Kelley said town officials are sensitive to the economic hardships so many residents are facing. Business at his own auto repair shop is "way down," he said -- Car owners are "not fixing anything; they're driving them until they totally fall apart and then junk them" -- and he knows other businesses in town are struggling too.

"I know that people have got to tighten their belts," he said. "But, my God, how tight can you tighten them until you choke yourself to death?"

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