The City of the Open Checkbook Needs to Tighten Its Belt
Part I – The Spending Problem
By Buck Fuller
City Council: Wake Up! The Public Wants the Proposed Budget to be Cut!
On Monday, May 22, 2023, after three hours of happy talk regarding the proposed 2024 fiscal year (FY) City budget, the City Council and City management heard from the public. It wasn’t happy. The City Manager requests a $9.2 million budget increase. When combined with the $8 million increase from last year, the total two-year $17.2 million increase is the largest in the City’s history.
The public wants the proposed budget to be cut and focused on only what is necessary. Higher taxes make Portsmouth less affordable for everyone.
Yet the Mayor and City Council offered no push-back to City management. No Councilor said, “This is too much.” In fact, City Councilor Andrew Bagley stated, “Broadly speaking, I am happy with the budget as it has been presented.” https://www.cityofportsmouth.com/citycouncil/city-council-broadcast-videos (2:34:15)
Councilor Bagley went on to talk about how the City offers “first-class” experiences that residents want. While he did speak about residents possibly being priced out of their homes due to higher taxes, he failed to connect the dots that this budget could threaten that outcome. The Mayor and the entire City Council also seemed blind to this being an imminent threat.
Councilors, it is your responsibility to push back and ask for a 2% to 4% cut to the proposed budget.
The Public Comment session quickly splashed cold water on all of this Council “happy-talk” about the proposed budget being acceptable. In fact, those Councilors who were diligent listeners at the community dialog sessions a few days earlier did report that citizens wanted to see little or no tax increase for the FY2024 budget.
So how could any of these City Councilors and Mayor be so out-of-touch? Either they practiced denial or selective deafness or maybe they just were cowed by the Deputy City Manager’s lecture on her stress levels and the woeful state of the City’s technology. Nowhere has there been a presentation given on best practices or case studies illuminating the most cost-effective path for improving the City’s technology.
From the Public: “How to Fix This Mess?”
Address the Spending Problem
The City needs to realize it has a spending problem. Now is the time to pull back on the reins of expense growth and stop tapping into Reserves or Fund Balances, built as they been from previous years’ budget surpluses. Remember, those reserves may not be as readily available next year when they could be needed. Recall the words of advice from the Finance Director, Judie Belanger, at the last budget session, “Reserves should not be used to fund operational expenses.” Practicing such discipline will probably do more to keep Portsmouth affordable to both renters and owners.
Commercial Abatements Shift the Tax Burden onto Residential Taxpayers
The lack of a level playing field here means that residential property owners carry an increasingly large amount of the tax burden for financing the City spending growth through property taxes. The residential taxpayer needs to be aware of how an “abatement” on a property tax assessment is handled for residential and commercial property owners.
Residential property owners who request an abatement are on their own or must bear the financial burden of employing legal counsel. Commercial property owners, whose abatement requests are often much larger dollar amounts, hand their tax bill over to their attorneys who promptly file requests for abatements. Often these are successful. The result is that the cost of any abatement given to a commercial taxpayer is shifted to the residential taxpayers. Residential taxpayers pay 58% of the real estate taxes to the City.
Councilor Tabor confirmed that when he ran a business, his practice was to hand the just-received tax bill over to his attorneys to apply for an abatement on the assessment. It was an automatic step taken to reduce his company’s expenses.
Just the Needs, Not the Wants
Finally, there are four areas that are simply matters of public health. All else is trivial by comparison. The City Council needs to remember what Portsmouth needs, not what it wants. This was reiterated by many of those who spoke during Public Comment. The City needs a fully-staffed fire department. The police department also needs to be fully staffed. It is short several positions and one position has been given to a social worker. If the City does not have adequate clean water and effective sewer treatment, it cannot thrive. These are essential funding needs and need to be adequately supported by the FY2024 and all future budgets.
Why Is It So Important to Limit the Growth in Taxes?
This is a basic issue of sound local government. If taxes increase too rapidly, as was noted during the May 22, 2023 Public Comment section, the cost of housing also increases. Landlords have to raise rents in order to cover the higher taxes. Homeowners have to allocate more precious income to pay the City the real estate taxes due. Commercial entities see their profit margins shrink as they pay more in real estate taxes.
Eventually, we reach a tipping point. Renters, homeowners and companies are driven out of Portsmouth simply because the cost of living in town has become burdensome. Even the rate of growth in taxes can convince residents that taxes are out of control. These residents and corporations have to make the difficult economic decision that being in Portsmouth is too expensive or will become so soon.
The City loses out because the population becomes less diverse, less interesting and less healthy as it becomes narrower. Perhaps it will become wealthier, but it has lost the key underpinnings of a strong middle class. And that is everyone’s loss.
The City, meanwhile, becomes more dominant in the local economy. With higher taxes, the City takes the taxpayers’ disposable income that would have been spent and invested in the local community. The economy becomes more of a centralized, demand economy instead of an open, free-market economic structure. A government-led, demand economy is less vibrant, less agile in adjusting to economic changes and less responsive to the constantly evolving needs of the residents.
For all of these reasons, the rapid growth in City expenses and the significant expansion of the City economic presence is worrisome and unhealthy for the future of the City’s economy. We’re at risk of the tail wagging the dog.
End of Part I
This concludes the first part of our discussion of the City’s proposed FY2023 Budget following the May 22, 2023 City Council meeting reviewing the City’s forecasted expenses and its need for significantly higher revenue.
Part II will discuss real estate taxes in Portsmouth in greater detail. This is where the bite is taken out of the taxpayers’ wallets.
