Analyzing Property Tax Rates

Conventional wisdom has the Oyster River Cooperative School District (ORCSD) as the bane of every Durham taxpayer. They refused to cede budget authority to the Town Council and continue operating as a semi-autonomous taxing authority. Hoots and hollers in a meeting hall packed with teachers, parents and students who steadfastly refuse to take any cost containment steps meet thoughtful taxpayer promoted warrant articles. In an act of solidarity, the ORCSD School Board refused to respond to a taxpayer questioning their training and experience in management operations, accounting and finance. The table below compares the effective per student tuition costs for various local communities:

Comparison of Education Costs

 School Tax RateState Tax RateTown ValuationStudents (ADM)Tuition
Durham16.762.45$906,003,460 919.71$18,924
Rollinsford17.672.75$221,987,197 283.6$15,984
Portsmouth5.562.49$4,096,603,575 2095.95$15,734
Kensington16.52.43$297,326,778 379.15$14,845
Stratham12.892.22$1,223,166,918 1283.61$14,398
Greenland9.062.51$653,828,900 528.87$14,304
Newfields16.172.64$239,922,299 318.25$14,180
East Kingston15.962.45$298,935,807 391.47$14,058
Newmarket15.022.35$744,537,983 932.44$13,870
Epping16.662.26$651,392,800 934.33$13,191
Exeter14.682.44$1,606,450,382 2105.47$13,062
Madbury17.012.42$236,728,935 354.02$12,993
Lee18.032.32$414,570,781 678.14$12,441
Brentwood16.772.33$507,147,059 830.37$11,665
Barrington13.042.22$915,099,903 1283.76$10,878
Dover10.542.51$2,649,300,450 3508.71$ 9,854
Somersworth15.392.32$845,720,630 1603.76$ 9,339
Rochester12.192.46$2,021,637,412 4038.05$ 7,334
Calculate tuition costs by adding the School and State Tax rates together and converting them to their decimal equivalents then multiply that sum by the Town’s Taxable Valuation and divide the result by Students. (((School Tax + State Tax)/1000)*Taxable Valuation)/Students

Tax rates are not set, they are calculated. The Town, County, State or School District determine their budgets and those budgets are then divided by the Town’s taxable property valuation to determine the tax rate. As a taxpayer, your property taxes may decline because the Town becomes fiscally responsible, or the overall taxable valuation increased (usually through growth, but sometimes through reevaluation), or more likely a combination of the two. Unfortunately, the normal occurrence is for a Town’s tax component to increase along with the taxable valuation, which generates a larger increase in overall Town expenditures. Growth covers some, if not all, sins.

Many Durham residents believe the solution to our tax problems lies in growth. We are rapidly transforming the Town into commercial student housing complexes and should soon reap increased Town valuation. But the real solution is not growth, rather fiscal prudence. If we add $5,000,000 to the current Town valuation and maintain the existing Town Tax component then the Town receives an additional $41,700 ($5,000,000 * (8.34/1000)) with no additional costs. Prudent action would reduce the Town Tax component to 8.29 ((($7,556,069/($906,003,460+$5,000,000))*1000). But that is a minor savings; if we are to be competitive with Exeter, for example, then we need to reduce our Town Tax component by .53 (8.34-7.81). To accomplish this we would need to reduce our 2014 Budget by either $480,181 ((.53/1000)*$906,003,460) or increase our Town Valuation by $61,482,967 ($7,556,069/(7.81/1000)) or some combination of these actions.  Given our total property tax rate, it is extremely remote that we will achieve that level of growth in Town Valuation.

Frequently we hear about the Town’s Kaisan training sessions and meetings. However, we have not heard what or who they are benchmarking, nor have we seen any tangible, meaningful goals being set. Quality initiatives are rarely, if ever, successful without the most senior officials’ (Town Council) endorsement and active involvement.

Quality management programs preach the mantra You can’t manage what you don’t measure. They also teach that organizations need to identify superior competitors to benchmark their operations against as a way of gauging their efforts to improve processes, customer service and control expenses. Benchmarking is one attribute of goal setting. Durham plans to spend $1,720,413 or 29.5% more in 2014 than in 2010, well above the compounded inflation rate! Other than the Community Center (a.k.a. Library) what service expansions have occurred? Durham has just entered the early phases of budget preparation and the table below is more than appropriate as the Town Council’s benchmark to spur the Town on a path toward taxpayer relief.  Other communities are doing a better job. The Town Council needs to focus on budget reductions and not the tax rate.

Local Tax Rate Components

 TownCountySchoolStateTotal
Durham8.342.8616.762.4530.41
Rollinsford3.502.9617.672.7526.88
Portsmouth8.721.145.562.4917.91
Kensington4.531.0916.502.4324.55
Stratham3.461.0812.892.2219.65
Greenland2.801.139.062.5115.50
Newfields4.291.1816.172.6424.28
East Kingston5.291.0615.962.4524.76
Newmarket6.071.0215.022.3524.46
Epping4.341.0116.662.2624.27
Exeter7.811.1014.682.4426.03
Madbury3.242.5717.012.4225.24
Lee5.532.8718.032.3228.75
Brentwood3.731.0516.772.3323.88
Barrington4.662.5413.042.2222.46
Dover9.992.9310.542.5125.97
Somersworth10.072.6915.392.3230.47
Rochester8.852.8612.192.4626.36

Glaringly obvious from the first table, is how far Durham’s cost of education has outstripped the other local communities. The ORCSD desperately needs to align their cost structure with other communities in the area. However, the table below paints a slightly different picture; ORCSD has, at least, tried to contain their cost increases over the last four years and it appears that Durham’s Town Operations (followed closely by the County) is the real cause of our rising tax burden.

Summary of Durham Property Taxes 2010 through 2014

 Town ValuationTown's TaxTownCountySchoolStateTotal
2014$906,003,460$7,556,0698.342.8616.762.4530.41
2013$913,186,825$6,949,3527.612.7216.072.3528.75
2012$898,172,169$6,799,1637.572.6115.692.3328.20
2011$892,139,835$6,352,0367.122.5415.432.1927.28
2010$895,039,219$5,835,6566.522.3016.112.0727.00
Growth Rate0.30%6.67%6.35%5.60%0.99%4.30%3.02%
Calculate Durham’s Town’s Tax by converting the Town Tax Rate to its decimal equivalent and multiplying that by the Town’s Valuation. ((Town’s Tax/1000)*Town Valuation)

Had the Durham Town Council constrained itself to the much maligned ORCSD’s level of growth between 2010 and 2014, namely 1.30% (the combined effect of School Tax Component increase and Town Valuation increase over the 4 years), then the 2014 tax demanded from Durham taxpayers, necessary to support the 2014 Town Budget, would have been $1,400,000 less. I challenge the Town Council to set the 2015 Town Tax Revenues (Budget) at no more than $6,300,000 to claw back those excesses, thereby putting Town’s management on an equal footing with the ORCSD, and for subsequent periods to limit budget growth to no more than the annual increase in Social Security benefits.

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