LACONIA — After projecting the 2013 property tax rate to rise by 28 cents when they adopted the 2013-2014 budget in June, city councilors were surprised and concerned to find it increased by $1.08 when the New Hampshire Department of Revenue Administration (DRA) set the rate last week.
In preparing the budget, City Manager Scott Myers projected property values to increase by $17-million, or 0.9 percent. Instead, the assessed valuation declined by $53.6 million, or 2.9 percent, from $1.857 billion to $1.804 billion. That drop accounts for most but not all of the rise in the property tax rate.
Troubled by the disparity between the projected and actual rates, Councilor Henry Lipman (Ward 3), chairman of the Finance Committee, asked what could be done to forecast the assessed valuation more accurately. Meanwhile, Councilor Bob Hamel (Ward 5) feared the difference between an increase of 28 cents and $1.08 would arouse suspicions of increased spending among taxpayers.
Myers stressed that an increase in the property tax rate caused by falling property values does not necessarily lead to higher tax bills for all taxpayers. The amount to be raised be property taxes — $39,311,468 in 2013-2014 , an increase of $831,733, 2.2 percent — was set by the budget and has not changed.
Myers said that while the total valuation has decreased by almost 3 percent, the decline is not uniform across all classes of property. While some classes have lost more value than others some classes of property may have increased in value. In other words, the effect of the property tax rate is not to increase tax bills across the board, but to redistribute the tax burden among property owners according to how much or how little the value of their property fell or rose.
Myers explained that the challenge of assessing property values was exacerbated by the sluggish real estate estate market. The number of comparable sales on which to base assessment has grown, but remains relatively low, particularly for specific classes of property. He reminded the councilors that when property values were increasing, property tax rates were falling, but with the recession the trends were reversed.
Despite the difficulties, Myers said that he and Jon Duhamel, the city assessor, have been discussing what can be done to refine the projection for the past month. He said that while the total valuation legally must be based on the assessed value of property as of April 1, the assessments need not be reported to DRA until September 1, which allows time for making adjustments. At the same time, he noted that DRA, not the city, assesses the value of property owned by public utilities, which in Laconia amounts to between $2 million and $3 million.
Apart from the assessed valuation, other projections subject to change bear on the property tax rate. Myers said that revenues from sources other than property taxes are estimated in June when the budget is adopted but are subject to adjustment prior to setting the tax rate in October or November. Likewise, the county assessment is projected in June, but not finalized until after the budget is adopted. Finally, how much to draw from the undesignated fund balance (rainy day fund) to apply to revenues to offset the amount to be raised by property taxes may be projected in the budget but changed before setting the tax rate.
Adjustments to the assessed valuation to align assessed values with market prices also contributed to significant increases in the property tax rates in New Hampton, Meredith and Sanbornton. In New Hampton, where assessed values represented 114 percent of market prices, a statistical revaluation to bring the two in line, together with a 6 percent increase in tax commitment raised the property tax rate 20.8 percent. In Meredith, where the tax commitment rose 7.2 percent and a statistical revaluation reduced the assessed valuation by 6.2 percent, raising the property tax rate 14-percent. In Sanbornton, the amount to be raised by property taxes grew only 1.2 percent, but a revaluation lowered the assessed valuation 10.4 percent, which reflected itself in a 13 percent rise in the property tax rate.
Property tax rates rates decreased in three towns — Alton, Barnstead and Gilmanton. In Alton, the tax commitment fell by 0.6 percent while the assessed valuation rose by 1.1 percent, the largest increase in the county, dropping the property tax rate by 1.8 percent. In Barnstead, the amount to be raised by taxes crept up 0.1-percent and the assessed valuation increased 0.4-percent, reducing the property tax rate 0.3-percent.
In Gilmanton, a combination of increased revenues and reduced expenditures reduced the amount to be raised by property taxes by 9.4 percent while the assessed valuation increased by 0.4 percent, trimming $2.27, or 9.7 percent, off the property tax rate. In Gilford, where the tax commitment rose by a paltry $258 and the assessed valuation climbed 0.6-percent, the tax rate decreased by 14 cents.