After towns react with alarm, 2 state agencies decide they can start setting tax rates in October after all
CONCORD — After announcing on Wednesday that the process of setting municipal property tax rates would not begin until November 7, the New Hampshire Department of Revenue Administration (DRA) yesterday backtracked in the face of widespread concerns among local officials.
We anticipated a reaction," said Commissioner John Beardmore of DRA, "but it was broader and more intense than anticipated." Beardmore said that in light of the reaction his department will begin setting tax rates between October 18 and 21, noting that typically the process starts in the middle of October and last year began on October 19.
State Senator Andrew Hosmer (D-Laconia) said that he heard from Laconia City Manger Scott Myers and town administrators throughout his district soon after the announcement and quickly discovered that his fellow senators were fielding similar calls.
Since the cash flow of cities and towns is at low ebb near the end of the year, the delay in setting the tax rates threatened to slow the process of billing and collecting the revenue required to replenish municipal coffers and fund operations for the next six months. Moreover, municipalities must pay their county apportionments in December. Counties finance a significant share of their operations by borrowing tax anticipation notes (TANs) that come due on December 31 and cannot be repaid without the revenue from the municipalities.
Municipal officials feared that if the setting of tax rates were deferred until November they would be unable to print and mail tax bills in time to collect sufficient revenue to fund operations and obligations without borrowing. At the same time county officials were concerned that cities and towns could find themselves unable to pay their apportionment in time for the county to repay its borrowing.
Hosmer said that there was also some concern for those who escrow their property taxes, explaining that if the bank or firm responsible for paying the taxes failed to mail the check before December 31, taxpayers' ability to claim a deduction on their 2013 federal income tax returns could be at risk.
DRA explained that the delay is the result of legislation enacted in 2012 that requires the New Hampshire Department of Education (DOE) to calculate the amount of state aid distributed to school districts on the basis of their enrollment in the immediately prior school year, not the enrollment of two years prior. In other words, the state aid distributed in the 2013-2014 school year will be calculated from the enrollment in 2012-2013 school year, not the 2011-2012 school year.
The DOE informed the DRA that it will not complete the calculations to measure school enrollment and apportion state aid until November 7, almost three months later than in the past.
Beardmore said that in response to the outcry, Virginia Barry, Commissioner of Education, agreed to provide DRA with estimated enrollments by October 11. He acknowledged that the estimates are subject to change, but described them as "reasonably accurate" and superior to any alternatives. He stressed that DOE "did nothing wrong, but was doing its best to calculate state aid in a compressed time frame."
Beardmore said that "we hope not to be in the same place next year when I hope we will have firm numbers as soon as possible." He said that since state aid to public increased in the wake of the Claremont decisions in the 1990s, this will be the first time tax rates have been set using estimated enrollment figures.
Hosmer said that he "commended commissioners Beardmore and Barry for making a quick about face and working with each other to resolve the situation." He suggested that "the Legislature may want to take another look at the law to what if anything can be done to improve the process."