A risk-free approach to municipal property tax relief
Beefing up meals and rooms tax distribution would ease local taxpayers’ burden
As we move forward to the general election, we must remember that state leaders can provide municipal property tax relief through their work on the next state biennium budget, and I am asking that they make municipal property tax relief a priority.
Local officials and others are well aware of the state’s approach in being fiscally conservative and cautious with revenue projections and spending. The same budgetary challenges are also found at the municipal level as community leaders struggle to find ways to provide needed services, and at the same time, try not to overburden residents with property tax increases.
State leaders are to be credited over the past several years for looking to live within our means and not always raising fees and taxes. They have also replenished the state’s Rainy Day Fund with year-end surpluses and distributed one-time revenue to cities and towns for road improvement projects.
But what if there was an opportunity for the state to provide ongoing property tax relief at the local level on a predictable, sustainable basis while not having to raise a fee or implement a new tax? I’m sure you’re saying that this must be smoke and mirrors or some kind of gimmick, but it’s not. In fact, the mechanism is already in place in state law: It is the meals and rooms tax distribution.
When the meals and rooms tax was enacted in 1967, the policy was to share the revenue with municipalities, with the state retaining 60 percent and municipalities receiving 40 percent. Over many decades, legislative changes reduced the municipal share so that the dollar amount being distributed has never reached the 40 percent level. I am requesting that state officials take the necessary incremental steps to restore the municipal distribution to the intended level and without any risk to the state budget.
In 1993, the meals and rooms statute was amended to provide a municipal “catch-up” formula where 75 percent of the year-over-year increase — but not more than $5 million — is added to the prior year municipal share in order to work toward the 60-40 split. This provided a good remedy as the additional funds were to be distributed only if revenues increased. It worked for the municipalities and protected the state.
In 2001, the state/municipal share was at 82 percent/18 percent, nowhere near the intended 60/40 split. As the tax’s revenue increased over that decade, the catch-up formula resulted in a 71 percent/29 percent split in 2010.
We are all well aware of the serious financial crisis that faced the state and the nation beginning around 2008. It was understandable that during this time the municipal distribution of meals and rooms under the catch-up provision was frozen by the Legislature. However, it is still frozen today even though revenue from this source has been extremely strong for the past five years. The current municipal share has fallen back to only 21 percent.
In terms of dollars, municipalities are receiving $68.8 million of the roughly $322 million being collected. The $5 million bump under the catch-up provision would increase that to $73.8 million. The following cities would receive an additional first-year increase: Concord ($160,000), Dover ($115,000), Keene ($87,000), Portsmouth ($81,000) and Laconia ($62,000). The following towns would also receive additional funds: Derry ($124,000), Goffstown ($67,000), Hampton ($57,000), Gilford ($27,000) and Lancaster ($13,000). Similar increases based on population would occur in every municipality across the state.
Imagine the positive impact on local budgets if increases such as these were to occur over a several-year period. The compounding effect would be significant.
As residents and officials speak with candidates for statewide office this fall, I hope one of the topics discussed will be restoring the catch-up provision for both years of the state’s fiscal 2020-21 budget. The revenue has been increasing year-over-year as the economy grows, the state is protected in that it doesn’t have to distribute the money if it doesn’t materialize, and municipalities have a more predictable and recurring source of revenue for budgeting purposes.
If state officials want to support local property tax relief, I can’t think of a better approach than this. No new taxes, no increase in fees, the provision is already in current law and the state is protected. Why shouldn’t this have broad bipartisan support?
Scott Myers has been Laconia city manager since 2011. He also served four terms as mayor of Dover from 2004 to 2011.