Town _hit with ‘sticker shock’

MERRIMACK – So, you opened your property tax bill from the town last month, and your jaw dropped.

Town officials refer to it as “sticker shock.”

To angry homeowners, that phrase doesn’t quite do justice to the increase in tax bills this fall.

Property tax bills in town were up an average of 19 percent. The tax rate itself climbed about 9.4 percent, to $20.24 per $1,000 of valuation.

What these numbers don’t explain is why. Letter writers to local newspapers, however, seem to think they have the answer.

Some have blamed the tax increase on spending by the town and school departments. Others have pointed fingers at the voters’ decision last year to use surplus amounts over $2 million to reduce taxes. Still others have cited a reduction in state aid to education or the burgeoning assessments caused by a still-hot housing market.

So who’s right?

They all are. Sort of.

Contributing factors

Do you want to know why your tax bill went up so much in 2003?

In short, home values and spending went up in the same year state revenues decreased and a budget surplus diminished because much of it had been returned to taxpayers as a windfall the previous year.

That’s an oversimplification, but it’s a starting point.Here’s the explanation from Merrimack town and school officials.

Selectmen’s Chairman Dick Hinch broke down the increase in the municipal portion of the property tax rate at the Oct. 30 meeting of the Board of Selectmen.

He explained 45 percent of the increase is because less of the general fund surplus was available for property tax relief; 30 percent of the increase was because of a rise in wages, insurance costs and retirement benefits for municipal workers; 20 percent of the increase was because of a jump in solid waste disposal costs; and 5 percent of the increase was because of an increase in other costs (the first year of the bond for buying the 563-acre Horse Hill Nature Preserve falls into this last category).

Bob Levan, the town finance director, went into further detail in an interview last month. He said three factors have contributed to the tax increase.

One-year windfall

First, the town has less of a surplus this year to apply to tax relief.

“Last year, the town voted to use any excess surplus over $2 million for property tax relief,” he said, noting the portion of the surplus last year that could be applied to tax relief was $2.4 million.

This year, that portion is only about $500,000.

A decrease of almost $2 million in the surplus to use for tax relief had “a substantial impact” on tax bills, Levan said.

“We don’t get those kinds of surpluses every year,” he said.

The effect of the surplus is easy to see by examining the municipal share of the tax rate over the past three years.

That tax rate was $5.07 for 2001 and then dropped to $3.70 in 2002. This year, it climbed back to $5.04.

The $2.4 million surplus was used to reduce taxes in 2002, dropping the rate. There was no large surplus to return this year, so the municipal portion of the tax rate climbed back to about the 2001 level.

Next year, based on early revenue and assessment estimates and the proposed budget of about $2.4 million, the municipal tax rate would fall to $5.01. The overall municipal budget proposed for 2004-05 is $24,563,977, a reduction of 7.06 percent from current spending.

“When the surplus was returned in 2002, it brought the town tax rate all the way down to $3.70,” Hinch said. “Meanwhile, the expense of operating the town remained the same.”

The state Department of Revenue Administration recommends towns maintain a surplus of $3.2 million, Hinch said.

The larger surplus “has the effect of keeping the tax rate stable,” he said.

Wages, other costs

Levan noted the second factor contributing to the tax increase was a jump in wages, benefits and especially health insurance for town and school employees. In the past three years, health insurance costs alone have doubled, Levan said.

The third factor is costs related to closing the town landfill. When the landfill closes this year, trash will have to be hauled out of town rather than buried at the Lawrence Road dump.

The town is building a $1.5 million waste transfer station, where trash will be collected and then hauled off to a location out of town.

The increase in cost to transport the waste would have happened “regardless of whether you had curbside pickup or the transfer station,” Levan said.

Besides the cost of building the transfer station, the town will be accepting bids for hauling and disposing of trash. Town officials have estimated those fees to cost the town about $90 a ton. A public hearing on the fees will be held at 7 p.m. Tuesday at the Town Hall Courtroom.

Loss of school aid

On the school side, the Merrimack School District’s portion of the tax rate climbed to $9.77 this year from $8.94 in 2002, an increase of about 9.3 percent.

Increases in wages and particularly health insurance benefits were a large part of the increase, as all school districts are labor intensive because they are such large employers. The tax rate also included the first half-year of a 20-year bond for a $17.7 million middle school.

The new school will have a much greater impact on taxes next year, as the school district will include not only the first full year of the bond but also school operating costs.

But school officials say what has hurt the school budget the most is a reduction in state aid to education.

Merrimack lost $500,000 in state aid to education this year. However, projections are for that aid to education to be reduced by $1.5 million in 2004.

“Our spending has not been out of line,” School Board member Rosemarie Rung said.

But the loss of state revenue has had “a great impact on the taxpayers,” she said. “Programs that are important to the community are going to be cut.”

The proposed school budget for 2004-05 hasn’t been set. School administrators are scheduled to present a budget proposal to the School Board in December. Board members, however, have said they’ll work to limit spending on controllable costs.

Hinch noted a study committee of state lawmakers is working to lessen that reduction in state aid.

“They are working diligently to ease that a little bit, but we don’t know where that’s going to shake out yet,” he said.

Home values still soar

The other part of the equation contributing to the tax bill increase is that home assessments, and values, are continuing to rise.

One telling statistic: Before 2003, the town’s tax rate fell for six consecutive years. Average tax bills, however, climbed in each of those years. That’s because the value of homes rose over that period, so homeowners paid taxes based on increasing assessments.

“The demand for single-family homes is great,” said Brett Purvis, the town assessor. “We can only reflect what people are buying and selling properties for.”

That might be changing.

“Things are real slow in Merrimack now and have been for a little while,” said Fred Prinz, a real-estate agent and owner of a townhouse on Middlesex Road.

Six months ago, Merrimack was a hotter spot for home sales, he said.

“Merrimack has always been a good town,” Prinz said. “It’s midway between Bedford and Nashua.”

The town offers a good commute to Massachusetts, and homes at one time were a good bargain for the price, as housing prices were a little lower than in Nashua.

“That’s all changed now,” Prinz said, noting the assessment of his home has gone up dramatically – and unfairly, he believes.

“People are willing to move further away from the Greater Boston area and there has been a revitalization of the Greater Manchester area,” real-estate agent Lois Ireland noted.

“Merrimack is now bearing some of the brunt of being an attractive bedroom community. Everybody’s homes have increased dramatically.”

On top of all that, there has been a shift in the tax burden to residential properties from commercial/industrial. The shift is slight in percentage, but accounted for slightly more than 1 percent of the increase in the average tax bill to homeowners, according to Levan, the town finance director.

“We’ve enjoyed having that commercial-industrial base bringing a large part of our tax requirement,” Rung said. “That’s changed this year.”

What’s next?

Hinch, the selectmen’s chairman, took heat for comments he made at an Oct. 30 selectmen’s meeting.

“This doesn’t make us feel all warm and fuzzy, but if you think this is bad, it’s going to be a hell of a lot worse next year,’’ Hinch said of the tax increase.

He was referring to the pressures the town and school budgets will face in 2004, namely the first full year of transporting solid waste out of town, the operating costs for the new middle school and the first full year of the bond to pay for it, and the expected loss of state aid to education.

Since those comments, the selectmen have been able to hold the line on spending next year, trimming about $1.4 million off the municipal budget proposed by department heads. In the next month, school officials will be working to hold down their costs as much as possible.

That’s good news, but it may seem like too little, too late for some Merrimack homeowners.

Prinz says he hears a lot of anger from taxpayers, most of which isn’t being passed on to town officials. He can relate to that anger, as his own taxes have risen from $3,100 to $4,200 over the past two years.

“On a townhouse? That’s ridiculous!” he said.

Prinz, for one, has had enough. He’s fed up with taxes, with town spending, with fighting the assessors’ office over his property value.

He’s just one person, but his anger certainly is felt by many Merrimack taxpayers.

“My townhouse is going on the market,” Prinz said. “I’m moving out of here. The heck with it.”