Revenues slow to a trickle in N.H. towns

For municipal budgets across New Hampshire, the state and national fiscal crisis is proving to be a bad case of trickle-down economics.

With town meeting season just around the corner, the non-property tax source of revenues for cities and towns — such as building permit fees, investment interest income and motor vehicle registrations — have all taken a dramatic drop statewide. The result is serious budget concerns.

“In a word, significantly,” said Dennis Delay, a budget expert with the New Hampshire Center for Public Policy Studies, in describing how deeply the economic downturn has affected revenues of cities and towns.

In December, building permits hit a record low — only 150 were issued in the entire state. Motor vehicle registration fees are down significantly as well, as fewer new cars are purchased — while registration of used or older vehicles brings in less revenue.

“Building permits are a good chunk of our revenue stream, and we will be down as much as $60,000,” said Exeter Town Manager Russell Dean. “The less we raise, either taxes have to be raised, or we will need to cut back.”

Exeter has been helped somewhat by the ground-breaking of a new addition to the River Woods retirement community and two smaller hotels, which are either under construction or almost ready to be built.

But Dean said the volume and size of permits being filed have changed. “We have seen fewer large projects and more home renovations and additions,” he said.

Like many other municipalities, Exeter has seen its share of investment income interest take a major hit, from an estimated $358,000 in 2006 to $120,000 in 2008. Dean said the budget also is squeezed by rising contractor costs for basic services, such as paving and mosquito control. And as of Nov. 30, Exeter had more than $350,000 in unpaid 2008 property tax bills.

In Portsmouth, the number of building permits issued rose in 2008, but the construction value of those permits was lower, said City Manager John Bohenko.

“We’re seeing a lot more home improvements,” he said, adding that “we expect building permit revenues will likely decrease” for 2009. The drop in revenues will make it even more challenging for Portsmouth to meet its goal of a zero increase budget for 2009-2010.

‘Very tight’ 2010

John Andrews, executive director of the Local Government Center, said “it might be a little early to tell” just how widespread the municipal revenue pain will be.

On the bright side, he said, the slowing economy and dropping prices might be “the best time for capital projects to go forward.”

“When we put our budget together last year, we anticipated a slowdown,” said Derry’s town administrator, Gary Stenhouse. Overall, revenues for the 2009 fiscal year budget are expected to be $200,000, or 15 percent lower, than 2008, he said. “It’s a little more negative than we thought but we think we are on target,” said Stenhouse.

What has surprised him has been the depth and breadth of the tightening of Derry’s revenue stream. Investment income has dropped almost in half, to potentially $700,000 for the current budget year. Motor vehicle registrations and building permit fees are down significantly, by as much as 25 percent.

Even recycling revenues, which were “doing great” last spring and into summer dropped dramatically, he said. “Paper was selling from $60 to $70 a ton, and now it’s down to almost nothing,” said Stenhouse.

Derry also was directly hit by the state budget crisis when a $200,000 grant for a water-sewer project was held back by Concord.

“The pain is going to increase,” Stenhouse said. “FY 2010 will be very tight.”

The Derry Town Council, which has final approval of the budget in May, has requested two budgets, one of which will be tax-neutral. “That will be an interesting exercise,” said Stenhouse.

One of the great anxieties lurking around the corner as the state continues to lose jobs and economic growth declines will be how much unpaid property taxes will rise across the state — when taxpayers are hit with potentially higher property tax bills in a declining housing market.

“The taxpayers are going to want relief and new assessments,” said Delay. But that relief may be hard to come by.