What a Fed analysis says about the Granite State



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Recent economic news has been drifting downward. Unemployment is up, many states are "pink-slipping" teachers and other public employees, and the debt ceiling showdown is still to come on Aug. 2. Even with such critical economic, fiscal and monetary policy issues in front of us, Congressman Weiner is "exposed" on Twitter and Newt Gingrich's campaign staff leaves en masse. Who would want to go to Washington these days?Well, round up the usual suspects! Someone has to serve, but are we getting the best and brightest? Did Michelle Bachmann really win the first Republican debate? In a few instances we do. They go to Washington and wade into the "tidal marshes of the Potomac" and rarely come out the other end the same person!My brother sent me a copy of a Federal Reserve of Boston research report, "How Does New Hampshire Do It? An Analysis of Spending and Revenues in the Absence of a Broad-based Income or Sales Tax." It is a thorough analysis and easily digested by the layperson. On the spending side, New Hampshire (simplistically) spends less on early and postsecondary education, has no public hospitals per se, other than New Hampshire Hospital (the state's hospital for the mentally ill with 144 beds), has tighter eligibility for Medicaid, pays public employees, on average, slightly less than nearby states and shifts certain costs to future taxpayers by under-funding retirement programs (for example).On the revenue side, New Hampshire governments rely on high property taxes and, while New Hampshire does not have an income tax per se, it does levy a tax on wages and salaries through its business enterprise tax. And in the past, it has bolstered revenues through creative Medicaid financing, but these Medicaid loopholes are being eliminated.The report does not offer comment on the viability and sustainability of the system going forward, but reading between the lines, one is left with the view that the system is very fragile.One result is a lack of sufficient funding for public education, technical training, economic development and job creation. The Department of Resources and Economic Development is definitely "dreading" the coming budget year (pun intended). Tourism has rebounded somewhat from 2009, but has a long way to go to get to the 2007 levels.North of the borderFor some time, we have been telling our clients that the current slow, bumpy, gradual, even minimalist, recovery from the Great Recession will go on for at least two more years. We will stick with that view, but do not rule out extending the timeline at a future date.While we have been busy, it continues to be lots of smaller projects and assignments. Leasing assignments are protracted and time-consuming. Like most of our clients, we look at our expenses every day, and we enter our third year of trimming costs. New technologies are cheap and continue to allow all of us to be more efficient. We are working longer hours, but hesitate to turn anything away.A recent trip to Vermont and Montréal clearly shows the differences between our two countries. Their major banks and other mortgage lenders didn't get heavily involved in the "securitization game." The new Canadian national government promises a balanced budget by 2014-15 without raising taxes. Unlike us, they can probably achieve that.They are resource-rich, including hydroelectric power, which is prompting the need for a new transmission line, named Northern Pass, which has certainly stirred things up here in New Hampshire. Originally, none of the electricity was going to be consumed in New Hampshire, it was all slated for Massachusetts and points south. Now PSNH says that 10 percent or more of the electricity will be used in New Hampshire over the 30-year contract.The Northern Pass will need to cut some new corridors in the northern part of the state, expand some existing right-of-ways before plugging into the existing New England transmission grid. Currently, New Hampshire is producing more electrical power than we are consuming, mostly due to Seabrook, but 30 years is a long time. And hydroelectric power from St. John's Bay is clean and renewable. In fact, PSNH is under legislative mandate to increase its renewable portfolio by 2020 or 2025. This debate will be ongoing.Bill Norton, president of Norton Asset Management, Manchester, is a Counselor of Real Estate (CRE) and a Fellow of the Royal Institution of Chartered Surveyors (FRICS). He can be reached at wbn@nortonnewengland.com. Edit ModuleShow Tags