Having recently received my tax bill in Manchester, I noticed something. The tax increase, projected by both Manchester Mayor Joyce Craig and the Board of Aldermen at .49%, was actually nearly triple that amount at 1.4%. In and of itself, a 1.4% tax increase isn’t earth-shattering.
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That I learned about it from my tax bill rather than from a statement made by the city, though was a curiosity.
Normally, the city, via a press release from the mayor’s office, would announce the tax rate once set by the NH Department of Revenue Administration. After scouring the city’s web site, not only was there no announcement to be found on the mayor’s page; there was no announcement to be found on the pages for the Finance Department, Board of Assessors, or Tax Collector’s Office.
Seems nobody was eager to broadcast the good news.
In researching the matter, I discovered that the near tripling of the tax rate increase came from two areas: The over estimation of the city’s tax base and the over projection of non-tax revenues. Anyone paying attention to the numbers wasn’t surprised to see that they used overly optimistic projections on both, especially given that the COVID-19 crisis had just begun. Remember, Mayor Craig give her budget address via Zoom from her home.
In the three budgets presented since Joyce Craig took office, taxes have increased by more than 5.7%.
For as interesting as this may be, Manchester’s taxpayers have a much bigger problem on the horizon: Revaluation.
The preparations are underway for a full revaluation of the city’s tax base in 2021. While revaluations take place every five years by state law, the coming one will likely be especially problematic for the city’s homeowners. An “exploding cigar” is coming their way courtesy of skyrocketing residential values and struggling commercial industrial properties. When all is said in done, there is likely to be a near seismic shift in the value of the city’s tax base away from commercial-industrial properties toward residential ones.
After every revaluation, about a third of the properties pay more in taxes, about a third pay the same and about a third pay less IF the city keeps the amount it raises in taxes the same. That’s because revaluations typically see a third of the properties increase in value by more than the overall tax base, a third increase by the same and a third increase by less. This is true on a relative basis and happens whether or not the overall value goes up, stays the same or, as the city saw in the 1990s, takes a dramatic nosedive.
The revaluation done in the early 1990s came amidst the collapse of property values as the Savings and Loan Bank crisis obliterated property values. It was then that residential taxpayers got hit with a major exploding cigar. While property values were down across the board, commercial-industrial values utterly collapsed, causing homeowners to shoulder an increase in the tax burden of approximately 20% before any increase in taxes that came from increased spending and declining non-tax revenues.
Now, the city is facing a revaluation during a time of soaring residential values while, thanks to the COVID-19 crisis, commercial industrial property values, especially those comprised of retail outlets, like the Mall of New Hampshire, and office complexes, are falling. People shopping online and working from home and this is eroding the value of any commercial property that relies on rent of its tenants. The less rent that gets paid, the less valuable the property is. With major properties, like the Mall of New Hampshire, announcing they will seek reductions of their property tax values because of this reality, we are very likely to see a decline in the city’s commercial tax base as we watch the residential values rise.
What this all means is that the fuse on another exploding cigar has been lit and the homeowner smoking it is about to feel the impact of the explosion; an explosion that will likely rival and very well may exceed the one that rocked residential taxpayers in the nineties.
Inasmuch as the revaluation will be happening in an election year, Manchester’s taxpayers should demand that the mayor and aldermen address the likely impact of the revaluation on the city’s homeowners. Even if they do abide by the tax cap, that won’t stop the shift of the tax burden from the commercial-industrial properties to the residential ones. What other steps will they take to mitigate the coming impact? What protections will they provide the residential taxpayers? Will they even acknowledge the issue before the elections? With the 2021 election scheduled for November 2nd, will they commit to releasing the revaluation results AND tax bills early enough to let the voters have their say on Election Day?
Taxpayers would do well to demand answers from any candidate on these issues and would do themselves a favor by supporting those who not only understand what’s about to happen but might also have some ideas on what can be done to blunt the blow from the exploding cigar. They would also do well to pay close attention to the coming budget deliberations. Mayor Craig and every incumbent alderman will demonstrate whether or not they understand what’s coming and how they will deal with it.
