For homeowners in Portsmouth opening their mail to find dramatically increased valuations and then a tax rate set to ensure a property tax hike, shock might be the best description of the impact on the entire household. The average residential valuation increase is 65% since the last assessment in 2019. I still own the house bought by my parents, during my lifetime, in this city…and this latest tax hike means that I will pay more in annual taxes than the original purchase price!
At a minimum, one might wonder why there is no “early warning system” to predict such increases, outside of newspaper reports of top end real estate sales. But the major driver of these increases is, after all, an ever-increasing city budget. The city manager, with City Council approval, added 28 new staff during her first year and then 7 additional years in her second year. This means additional personnel salary, benefit, and pension cost increases at a scale that one would not expect is needed to “administrate” a small city last reported to be only a population of 22,277 (NH Office of Strategic Initiatives, 2023). The city is not exercising the fiscal restraint required of real leadership, and which now has our residents reeling. And it probably doesn’t stop there; after all, this expanded staff will most likely need expanded office space in the near future. The FY2025 budget for Portsmouth, approved unanimously by the city council, is $144,861,347; a 4.5% increase over the previous year’s budget (and a 5.32% increase in that major part of the budget that is operating costs including government, fire, police, school, etc.) and a harbinger of continuing increases. By comparison, the FY2015 city budget was $96,641,762; in 10 years, the city has increased its budget by 50%, well beyond what we should expect from inflation.
Our mayor has been quoted in the recent newspaper (October 10) as believing that a solution lies in “New Hampshire adopt(ing) a homestead exemption — a measure that would reduce the taxable value of a primary residence for long-time homeowners.” While this may in theory be a good idea, it is a deflection of this tax-induced shock to the state legislature, which most likely would take years to propose, debate, enact and implement. Further, since currently the same tax rate is applied to both commercial and residential properties, an additional proposal at the state level could be to change NH law to allow different tax rates for different uses (in Massachusetts this is called “tax classification”).
However, in the meantime, the city, including the mayor, the City Council, and the Planning Board have overlooked/ignored the following actions within their control and which are all currently contained in our toolkit for governance:
Impact fees need to be charged to commercial (and large residential) development projects in Portsmouth
NH Revised Statutes Annotated RSA 674:21V authorizes city Planning Boards to specifically levy charges (and payment schedules) on new development in New Hampshire to help fund public infrastructure costs. These fees are intended to recover capital costs to the city’s infrastructure (such as the necessity to build/maintain additional roads; to expand the fire and/or police departments; to increase water and waste water treatment and distribution facilities as well as stormwater and drainage facilities). The impact fees can also recover costs of projected impact of development on public school facilities, libraries, recreational facilities…and more.
Impact fees are assessed at the point that the Planning Board approves a subdivision or site plan, or when a building permit is issued. The impact fees are paid by developers as part of the development approval process through the Planning Board. And the fees are collected as a condition for issuing a certificate of occupancy. Such other cities as Lebanon, NH have a track record of charging impact fees that help finance their cities. This is an action that has been brought up in previous Planning Board meetings but never acted upon. It is an action that can be implemented now so that homeowners are not subsidizing commercial development by paying for all of these expanding public services (a case in point is the proposed $42M expansion of the Portsmouth Police Department headquarters, honed down from an original $70M estimate!).
An updated Master Plan has long been needed in Portsmouth
There has been a pressing need for a new Master Plan that reflects current, changing economic and development realities and the kind of city, its character and its growth, that citizens/homeowners want. It also needs to better and to more stringently guide land use and development within Portsmouth. The current Master Plan (adopted in early 2017 when I was a brand-new member of the Planning Board) is now outdated and vague, summarizing into overall “themes” the input of the many residents who engaged in developing it. It assumes limited growth and fails to anticipate the development boom that has changed Portsmouth in the last decade. The old plan has fallen far short of providing specific and measurable objectives, defined ranges and limits for Planning Board members to be able to apply in order to seek reasonable development growth with benefits to neighborhoods peripheral to the downtown “urban core”. It does not provide milestones towards agreed upon goals/objectives, in each area of the city including at the crucial transition points between our downtown core and bordering neighborhoods.
I have had increasingly grave concerns that the degree (i.e., square footage expansion) of commercial (and upscale residential) development has outpaced and outstripped any Master Plan guidance, and I urged the Planning Board for over two years to majorly revise or design a new and more rigorous document. This master planning process was eventually given a meager line item in the city budget ($250K) and then deferred by the City Manager to 2025, lagging way behind the pace of ongoing, ever-evolving development. We can expect another 18 months now, a delay caused by politicians and a weak Planning Board. Instead of being a document to strategically lead and shape development, it has largely been left to developers to decide the new configurations of the city. Frequently, city officials engage in dialogue with developers and provides zoning changes to accommodate them. Special use permits and variances from zoning are routinely granted in exchange for minimal if any public benefit. This situation, and the marginalized role of the Planning Board in guiding growth and development is one of the major reasons I resigned from that Board earlier this year.
We have the means and the data to anticipate and control tax rates, to balance residential versus commercial tax burden, and to provide for some additional balance in cost-sharing by levying impact fees—as well as to guide and control growth and development in the interests of our citizens. We have not used these tools proactively. This is not sound city leadership nor effective use of the state-defined powers that already exist for local Planning Boards.
The RFP to update the city’s Master Plan has finally been issued and proposals are being accepted. It is a far from proactive move, given that it will take 18 months to create a new one. Beyond participation in public forums, although vital, let us make sure that we the citizens participate in every step of review and final design of this important strategic document. For instance, the new Master Plan should be able to answer the following questions and provide ways to track interim progress:
- What percentage of green space, public parks, and treescapes do we want and which available land should be earmarked for these purposes? How much green space should be included in new residential and commercial development projects?
- What areas of the city are appropriate for greater density, and at what level/degree, and what areas should have strict limits? And what building standards should be employed to ensure a smooth transition between high density and neighborhoods, addressing noise and traffic and parking concerns with specific and measurable criteria.
- How much affordable housing is needed in the city? When do we have “enough”? Where should that affordable housing be located to ensure quality living standards for low-income folks? And at what point have we met our share of the Rockingham County-wide quotas?
- How does additional commercial and residential development affect city tax revenues and the tax burden of residents? Is the development paying for itself or raising our taxes to service it?
- What is the right mix of tax burden between residents and commercial landowners, and how can we drive more of the tax base to the commercial sector? (If we cannot answer this, if there are not clear benefits to city residents, then why continue to tout Portsmouth as a great tourist destination and encourage additional retail, restaurant and hotel development? So far, the cost benefit analysis of this point of pride does not favor the residents.)
The tax-induced shockwaves are being felt by residents everywhere across this relatively small city, leading to economic reshuffling. The cost of living in Portsmouth continues to rise and some residents are unable to meet the demands of severely increasing taxes. What an irony that our City Council is focused on providing affordable housing and yet seems to overlook the critical importance of reining in spending and taxes to help make Portsmouth affordable for its current residents. The questions regarding benefits to residents from growth in development and city government remain. Yet the rate of growth in both continues unabated. Our city grows and our taxes keep going up? What is wrong with this picture, and what are our elected and appointed leaders doing to manage growth, control costs and keep Portsmouth affordable for our current taxpayers?
Jayne Begala, MSPH, MBA, Portsmouth resident
