Tax cap means city has a big stake in county budget fight

LACONIA — Apart from the 268 county employees no one has a greater stake in the outcome of the struggle over the 2014 Belknap County budget than officials of the City of Laconia, who could be faced with squeezing unforeseen expenditures of nearly $176,000 within the bounds of the property tax cap.

The Belknap County Commission has proposed budget of $26,570,997, which would raise $14,445,359 in property taxes, an increase of four-percent.

In defense of their budget the commissioners have explained that it represents an increase in expenditures since 2008 of only 1.5-percent. Moreover, they calculate that the increase in the amount to be raised by property taxes would raise the county tax rate by five or six cents in the eleven municipalities in the county. The higher rates would add to the annual property tax bill of the owner of a $300,000 home by amounts ranging from $13.68 in Belmont to $18.25 in Meredith.

In Laconia. the county tax rate would climb by six cents from $1.47 to $1.53 and increase the tax bill on a $300,000 home by $17.81. "Six cents to me as an individual taxpayer doesn't sound like a big deal," said Mayor Ed Engler. "But, multiply that over the whole city and its nearly $110,000. Because of our tax cap," he continued, "the City Council must approach this from the perspective of the whole city, not as individual taxpayers."

The tax cap limits the annual increase in the amount raised by property taxes, including the county tax, to the rate of inflation, measured by the Consumer Price Index — Urban (CPI-U), for the prior calendar year, plus an additional amount representing the value of new construction, which is calculated by multiplying the value of building permits less the value of demolition permits issued between April 1 and March 31 by the prior year's property tax rate.

Applying a CPI-U of 1.5-percent against the 2013-2014 tax commitment of $39,8-million, City Manager Scott Myers calculates that the rate of inflation will allow $597,500 of additional expenditures in 2014-2015. Likewise, he estimates that $15-million in the assessed value of new construction will permit another $331,200 in increased spending. Altogether, Myers projects the amount to be raised by taxes can rise by $928,700, or 2.3 percent, which is divided proportionally between the city, schools and county.

Last year the county apportionment of $2,655,238 was 6.6 percent of the total amount to be raised by property taxes in the city If the share of the county tax remained constant and rose in pace with the tax cap allowance, it would be projected to increase by approximately $61,500 in 2014. Any greater increase in the county tax must be offset by reducing expenditures elsewhere in the municipal/school budget to comply with the limits of the tax cap.

While the county budget proposed by the commission may add pennies to the county tax rate, it would increase the city's apportionment by more than $107,000.

Furthermore, this year the county has eliminated the appropriation for the city and 10 towns belonging to the Lakes Region Mutual Fire Aid Association (LRMFAA) from its budget. Instead of being billed through the county tax, the municipalities will be billed directly by the LRMFAA according to a formula consisting of the sum of three factors — a fixed charge, assessed value and total population. As a result, the cost to Laconia will rise from $106,731 to $130,000.

Taken together, the $107,000 increase in the county apportionment and the appropriation for the LRMFAA amount to more than $237,000. Less the $61,500 projected to fund the anticipated increase in the county apportionment, the commissioners' budget would raise city expenditures by about $175,500. This represents almost a fifth of the additional spending allowed by the tax cap and would have to be offset by commensurate reductions in the city budget.

"The commissioners' budget would force the city to rob Peter to pay Paul," said Rep. Frank Tilton (R-Laconia), chairman of the executive committee of the Belknap County Convention.

Acknowledging that the tax cap is a constraint the city chose to impose on itself, Engler said that "the county commission and convention have to appreciate where we're coming from."

The county convention is preparing a budget, which remains a work in progress. However, so far the convention has trimmed the commissions' budget by $858,350, virtually all of it in personnel costs. Currently the convention proposes to spend $25,712,64 and raise $13,551,598 in property taxes, a decrease of 2.4 percent.

The effect on the city would be to reduce its county apportionment by $66,883 — from $2,655,238 in 2013 to $2,588,355 in 2014. Setting the reduction against the $130,00 billed to the city by the LRMFAA leaves a outstanding balance of some $63,000, or approximately the increase in the county apportionment city officials projected.

In other words, the city would be able to meet its obligations to the county within the limits of the tax cap without offsetting reductions in either the city or school budgets.

"We're looking after the city's interests and the county's interests," Tilton remarked.

Engler said that the experience with the county budget foreshadows the challenges the city will face if and when the county commission and convention begin to address the renovation or reconstruction of the county jail.