Smoke & Mirrors

Boy, what great news in the latest Durham Friday Updates . We are going to have a 2.2% decrease in the overall Property Tax Rate. Yahoo! In case you didn’t see it, here is the article:

DURHAM’S FULL TAX RATE TO DROP BY 2.2%
I a very pleased to let you know that today we received the finalized 2015 tax rate from the New Hampshire Department of Revenue Administration. For the first time in many years, the full tax rate for Durham has gone down!

The new full rate is $29.85, a decrease of 2.2% compared to the 2014 rate of 30.52, a drop of $.67.

This decrease is a result in part of the town’s increased tax base due to new development and also a drop in the school portion of the rate due to higher than expected revenues there and in the county portion of the rate as well.

This is good news for the taxpayers of Durham. Kudos to the Durham Town Council, ORCSD, and Strafford County!

 I know better than to get too excited about the PR pieces in the Durham Friday Updates. My first inkling was the kudos given for raising the Town’s local tax rate. Then the flashbacks to my management accounting days reminded me that the devil is always in the detail.

First let’s see what happened to Durham’s Taxable Property Valuation basis (provided by the Town Office):

2014 2015 Increase % Increase
Taxable Property $916,456,045 $965,086,266 $48,630,221 5.31%

Nice increase in the taxable base, so what happened to the actual tax receipts (tax rate times taxable valuation) for 2014 compared to 2015:

Change in Jurisdictional Tax Receipts
2014 Tax 2015 Tax
Town $7,643,243 $8,183,932 $540,688 7.07%
County $2,630,229 $2,692,591 $62,362 2.37%
Local School $15,396,462 $15,634,398 $237,936 1.55%
State School $2,300,305 $2,296,905 -$3,399 -0.15%
Total $27,970,238 $28,807,825 $837,587 2.99%

Let me get this straight, we have a 2.2% decrease in the overall Tax Rates and a 3% increase in overall Tax Receipts and the Town Council receives Kudos for granting a 7.1% increase in gathering overall tax receipts from the Town’s taxpayers.

My, after building a Palace to their memory during 2014 and taxing us for numerous social agendas, that many, if not most of us, never use, and which have now been baked into the Town’s base budget, we find that we need 7.1% more to run this Town year over year!

The other thing that is obvious is that only the State School Tax Receipts were, in aggregate, less than the prior year. Given that projections are currently running around 0% for a Social Security benefit increase this coming new year it seems that Durham could have been a little less greedy.

If the Town Tax component had been held at the prior year’s rate, then the tax receipts increase would only be 5.3%. If the Town Council actually cared about tax payer welfare and held the 2015 budget to the amount of the 2014 budget, then we could have had a reduction in our Town Tax rate of 5% or $.42 for a rate of $7.92 for a decrease of over 4% in our total property tax rates.

The misdirection in the Friday Updates’ message focused you on the change in tax rates and not the implications of those rate changes on tax receipts. Below is a simple analysis that shows the effect of the changes in tax rates as well as the effect of the change in taxable valuations.

Property Tax Variance Analysis 1
Rate Variance Volume Variance 2015 vs. 2014
Town $128,304 $412,384 $540,688
County ($73,316) $135,678 $62,362
Local School ($549,874) $787,810 $237,936
State School ($119,139) $115,740 ($3,399)
Total ($614,026) $1,451,612 $837,587

You can put all the lipstick you want on a pig; it is still a pig.

Before you run down to our local Temple of Doom calling for the administrator’s head, consider that this tax receipt increase and therefore the decision to let Durham citizens suffer with all the congestion in the downtown area without any benefit from the increased taxable property valuations was orchestrated by your elected Town Council. I refer you to Durham’s Friday Updates from 24 October 2014:

The Durham Town Council established the following budget goal as part of its annual goal setting process, and this year’s budget proposal will be consistent with that goal: “Develop operating budgets that limit growth in the Town’s portion of property taxes by the rate of inflation plus new additions to the Town’s taxable base. This goal is for both the near and longer term.”

When you consider that the full taxable valuation impact of the downtown developments won’t be seen until 2016, buckle up. Gives new meaning to the old adage, never give a sucker an even break.

1 The rate variance was calculated by multiplying the change in rates from 2014 ($0.14) times the 2014 taxable property valuation. The volume variance was calculated by multiplying the 2015 Town Tax Rate ($8.48) times the 2015 taxable property valuation.
This entry was posted in Durham. Bookmark the permalink.