Newfound school district will set precedent regarding tax cap

BRISTOL — The Newfound Area School District was the first in the state to adopt a property tax cap after the New Hampshire Legislature passed the enabling legislation in 2011. Now it is in the position to set a new precedent as it deals with how a tax cap budget works when three of the seven member towns are leaving to form their own school district.

Newfound’s tax cap limits the annual increase in the amount to be raised by property taxes to 2%. However, with four towns picking up most costs formerly borne by seven towns, even a level-funded budget for 2025-26 might exceed that cap.

The new Pasquaney School District will take over the operation of the Bridgewater-Hebron Village School to serve the towns of Bridgewater, Groton and Hebron, so Newfound will see a reduction in spending for that site. Some students in the new school district may remain with Newfound through tuition agreements, adding to the revenue side of the Newfound budget, but a “tailoring-out” agreement also allows Newfound students to tuition into BHVS.

Significantly, the entire central office costs for Newfound will become the obligation of the four remaining towns. Pasquaney’s new School Administrative Unit 108 offered to cover its share of the cost for shared superintendent services with Newfound's SAU 4, including any additional personnel needed to oversee the two districts, but the Newfound Area School Board rejected that request.

With no precedent to guide the district, Newfound Business Administrator Angela Carpenter has been consulting the New Hampshire Department of Education, which advised bringing the Department of Revenue Administration into the conversation to figure out how to handle next year’s budget in light of the tax cap. School district attorney Barbara Loughman has proposed three options to deal with the question, Carpenter said.

“There’s three different ways that we can calculate the tax cap, and we’re trying to decide how to do that,” she said. “The Newfound Area School District is going to be setting precedents with whichever method we go with, and then we have to basically be able to defend that method” before the Department of Revenue Administration.

Bruce Kneuer, a revenue department auditor speaking on Sept. 25, said the department can offer no guidance and would not have a say in Newfound’s decision. Tax caps are “entirely a local point of view” beyond the state's purview, he said.

“I know the situation is unique,” Kneuer said, noting the only similar case he could find was when residents in the town of Sullivan voted to leave the Monadnock Regional School District in 2012. Monadnock, however, had not adopted a tax cap, “so there’s no similarity to what’s happening here.”

Kneuer commented, “I suppose, if [Newfound’s] decision somehow intersected with an area of authority we do have, then DRA may have something to say, but initially, it’s a tax cap [decision], and they don’t send them to us for review.”

Kimberly Houghton, communications administrator for the Department of Education, had nothing to say except to refer questions to the DRA.

Carpenter said a committee is planning to meet next week to settle upon a strategy, which will determine not only how to approach next year’s budget, but also how to proceed with teacher contract negotiations. The current union contract expires on June 30.

The new teachers’ contract will be important not only for Newfound, but also for the Pasquaney School District. Under state law, the new school district will have to match whatever terms the Newfound teachers negotiate for their new contract. Educators who will be teaching at the Bridgewater-Hebron Village School will have to form their own union to negotiate a contract, but it will be based on Newfound’s. The interim school board of the Pasquaney School District has said it may not only match Newfound’s benefits, but perhaps enhance them.

It is not only questions about the tax cap which have delayed Newfound teacher negotiations. The final determination of last year’s spending is awaiting DRA approval on Sept. 30. While no budget report is final until the DRA signs off on it, school districts generally have a good idea of where things stand prior to the Sept. 30 date. In Newfound’s case, the calculation has been complicated by a cyber attack last fall which wiped out the financial records on the school district’s server. For much of last year, the previous business administrator had to manually track spending on an spreadsheet while trying to rebuild the database.

The pressure on the Negotiating and Budget committees is especially strong because of changes relating to the district split. Newfound must have a budget prepared for a hearing on Jan. 13, ahead of its Feb. 1 deliberative session. The Pasquaney School District will need to rely on information from Newfound when developing its own budget for hearings ahead of its district meeting in March.

Whatever the property assessment allowed under Newfound’s tax cap, voters always have had the option of overriding that cap, and they have done so for the last few years, as discretionary school spending has shrunk, forcing the school board and budget committee members to propose reductions in academic and extra-curricular programs. A tax cap override is limited, however, to a 10% increase over the proposed budget.

The Legislature has recognized some of the problems tax caps bring, and carved out exceptions for inflation and other factors, such as when districts return unexpended money at the end of the year to reduce that year’s taxation. No one, however, has confronted the challenge of losing nearly half of a district’s membership through secession. Dealing with that is Newfound’s challenge.

Perspectives

State Rep. John Sellers of Bristol said, “It seems like Newfound is taking the correct steps by reaching out to the DRA and DOE for advice.

"This secession will cost everyone, and cuts will probably need to be made; otherwise the taxpayers will take the hit and, with an economy that inflation has hit hard, new taxes are not what the taxpayers need, especially the retired elderly.”

He continued, “I would think cuts in the central office would take the brunt of the hit, now that they will have almost half the workload. ... losing almost half the district’s membership and trying to keep everything as status quo I believe is just not doable.”

School board member Francine Wendelboe of New Hampton sees it differently. The statement about “half of the district leaving is misleading,” she said. “Those three towns only have maybe 12%-15% of enrollment, and they contributed about $3 million in taxes to Newfound, probably less with the [statewide property tax] factored in and credits. This, out of some gross spending of $26 million, is a drop in the bucket. It cost SAU 4 more to operate BHVS than we got in taxes from them.”

She predicted Newfound will likely net $1 million in tuition from Pasquaney.

“As to the tax cap,” Wendelboe said, “I believe we have to follow the law, which says it is based on the prior year’s spending for the district, which was the seven towns. The following year, it would be based on the four towns, but we will likely get a reprieve for this coming year. We can’t decide to ignore the law, even though common sense seems to dictate four towns. And I do not agree with the theory that the tax cap is null and void, since it was voted on by seven towns and not four. I don’t think it will be a huge effect this year. Time will tell, when we get some hard numbers.”

Sellers said taxpayers should be aware of a potential tax cap override, “and if they want to have any say in holding the tax line or increasing above the tax cap, they must show up at the deliberative session.”

He added, “This is probably the toughest year for Newfound SAU 4 because of the computer hack destroying vital financial data and more, an interim superintendent and a search for a new superintendent, along with so many other moving pieces and so little time to complete the tasks.”