Use of reserve funds and complex nursing home finances at heart of county budget controversy

Public hearing set for Tuesday night at 7 p.m. at Belknap County Complex

When the Belknap County Convention meets tomorrow at 7 p.m. to hear citizen input on the county’s 2008 budget, there will be more at stake than simple compliance with a statutory mandate for a public hearing. A delay in the budget approval process has presented an opportunity for municipal officials to protest a 13-percent increase in the county property tax bill that is passed along to Laconia and 10 townships to share. And it has sharpened the focus on the at times hopelessly complex way in which federal, state and county government combines to meet the $11-million cost of operating the Belknap County Nursing Home.

When it last met on February 19, the 18 lawmakers who comprise the Convention scheduled tomorrow night’s session after it heard an allegation from Gilford Budget Committee member Doug Lambert and former Laconia Mayor Thomas Tardif that it had not properly complied with the requirement of NH RSA 24:23 for a public hearing on the contents of county’s spending plan. Under New Hampshire law, the local legislators act as the oversight body for the county’s financial operations.

The decision to hold the public hearing was not made until after the convention had considered and approved a 2008 county budget of $26.6-million dollars, a sum that is just shy of $1-million more that the budget for 2007, an increase of approximately 3.75-percent.

The devil, however, appeared in the fine print.

While the county does generate much of the revenue needed for its operations, it is not totally self-sufficient. To the extent that income from county departmental operations and transfers from the state programs and the county’s surplus do not cover the cost of those operations, the property taxpayers in the City of Laconia and the 10 towns of the county pick up the shortfall.

That shortfall grew 5-percent in 2006 from the 2005 assessment and 7.5-percent in 2007 from the 2006 levy.

The 2008 budget approved by the convention on February 19, subject to final action following the public hearing tomorrow evening, calls for an assessment against the Belknap Country property taxpayers of more than $1.7-million or 13.07-percent more than it was in 2007 and more that two and a half times what the increase was in 2006.

At slightly more than $3-million, Laconia’s property taxpayers foot the largest single share of the proposed county-wide levy, which is apportioned based on the value of its taxable property as a percentage of the whole.

Historically, the county property tax levy has not been a big issue. Each property owner’s share is separately itemized on the city and town property tax bills in the same way as the school district and municipal shares are listed individually. Thus, when questioned, city and town officials could simply point to the tax bills, saying that the county tax was beyond their control.

Enter the City of Laconia’s property tax cap which, stated very generally, limits the growth of the annual property tax levy for all purposes — city, school district, and county — to the same percentage increase in the city’s total assessed value from the prior year.

As Laconia City Manager Eileen Cabanel explained in her report to the city council on February 25, “Laconia’s city and school district budgets have been developed on the presumption that the Belknap County property tax levy will increase at a rate in line with the 5 to 7-percent of the past two years. At 13-percent, or almost twice what it was last year, program expenditures in both the city and the school district budgets will have to be cut to make up for the county increase.”

While the other communities in Belknap County do not operate under a tax cap, their county property tax liabilities for 2008 are equally significant. Meredith, Gilford and Alton are faced with county tax bills of $2.6-million, $2.3-million, and $2.5-million respectively. Belmont is more than $1-million. Tilton is more than $800, 000, Barnstead is approximately $750,000, and Gilmanton is $724,000. Sanbornton and Center Harbor will come in at almost $600,000, and New Hampton should be about $377,000. These numbers are based upon the 2007 property tax assessments; the actual county tax levies for each community will be based upon their respective shares of the 2008 total county assessed valuation.

The reasons for the “almost double” increase in the proposed county property levy are complicated.

The clearest change in the revenue side of the proposed budget is the $500,000 reduction in the amount the county commissioners propose to transfer from surplus "rainy day" funds from the amount of $2.5 million transferred in 2007.

After that, the revenue reductions become a matter of debate bordering on controversy equal to that surrounding education funding and lawsuits over public employee retirement funding.

The budget originally submitted to the Convention for review in December of last year called for an 8-percent increase in the amount to be raised by property taxes. At the time, Chairman Philip "Bud" Daigneault cautioned, however, that the County Commission was expecting the rate at which the county gets reimbursed for nursing home care to fall between $11 and $14 per resident, per day — from the $155-per-day rate that was the standard in 2007 — but that number could go even lower.

Last month, County Administrator Nancy Cook said the rate did, in fact, end up lower and that drop accounted for an additional $300,000 loss of projected revenue that has to be made up by property taxes.

Additionally, there is a dispute over the financial impact on the counties of the 2007 legislation that transfers the full responsibility for county nursing home expenses heretofore reimbursed by the state to the counties and transfer of the county’s responsibility for some children’s programs to the state.

Many county officials believe that this exchange of responsibilities will increase county costs at the outset and into the future. The nursing home portion of 2008 Belknap County budget appears to be built on this premise. Cook said last month the net loss for the county will add up to $568,000 this year.

On the other hand, Senator Kathleen Sgambati (D-Tilton), one of the principal sponsors of the 2007 legislation that created the exchange of programs, has said throughout the discussion of its fiscal impact, “Counties will not absorb all of the costs related to the growth in the elderly population. The counties’ expenses are capped in the state budget and will be each biennium until the arrangement sunsets in fiscal year 2014 …. The formula changes are cost-neutral to the counties, and they will not, in aggregate, be paying any higher percentage of costs that they would be under the current law.”

Furthermore, she continued, “Nothing happened in the first year (following the June 30, 2007, sunset of the then existing reimbursement arrangement). For two years after that, (HB2, the legislation creating the change) contains a hold harmless provision that insures that no county experiences a loss of funds.”

At the end of tomorrow’s public hearing, which will be held at the Belknap County complex on North Main Street in Laconia, Lambert and Tardif will have opened a process far more than they may have thought they would. It will be interesting to observe who takes advantage of the opening and what sort of questions they ask.

At least one Laconia City Councilor — Greg Knytych (Ward 1) — has indicated he intends to weigh in on the matter.