Protecting Portsmouth’s Taxpayers: The Difference Between Words and Deeds

10.16.15 | Education

This week, the Association of Portsmouth Taxpayers (APT) released their list of endorsed candidates for City Council this fall.  Included in that list were two incumbents, Councilors Jack Thorsen and Councilor Esther Kennedy. Keeping property taxes from going up faster than residents’ ability to pay those taxes, is a very important priority. The APT’s announcement provides a logical time to ask: If one’s goal is to keep residential tax increases at or below inflation (the primary stated goal of the APT in making their selections), what factors actually get to that outcome – and how do these candidates compare by these measures?

1)  Restrain spending increases by being for proposals, rather than simply voting against budgets. The heat of the budget process typically occurs in the final few months of the fiscal year (which ends on June 30th). However, most of the city’s annual operating budget goes to personnel (salaries, benefits, and retirement), and most of that decision making must occur over months and years, not in the final weeks before a budget’s final vote.

It can be politically difficult to reduce budgets – or even simply decrease the rate of increase – without being accused of risking public safety or the quality of public education.  However, we have current members of the City Council, including Chris Dwyer and Eric Spear, who were in office during the recessionary years of the late ’00s, and were willing to make difficult, but necessary decisions (including an almost 10% reduction in municipal staffing levels).  We also have examples from the last decade of city councilors, including Steve Marchand (author of this post), who were willing to both advocate for lower versions of budgets and provide substantial analysis with counter proposals based on that data (including staffing levels for the school and police departments).

This is not what happened in 2015.  Three councilors voted against the final $101 million budget, all asserting it was too high, including Councilors Thorsen and Esther Kennedy.  Each had their own explanation.

Councilor Thorsen, to his credit, at least offered a motion to reflect a concern, moving to cut $50,000 for the collective bargaining agreement.  When it failed, he voted against the full budget, saying he had a “profound belief that our budget is too high.”  If the motion to reduce the $50,000 had passed, would that have changed his profound belief that the $101 million budget, which would have been reduced to $100.95 million budget, was too high?  When he also said that “I don’t think residents should pay more taxes,” the implication was that the reductions needed to get his vote were far greater than the $50,000 motion – indeed, well over a million dollars would need to be cut to keep taxes flat.  Where would Councilor Thorsen have found that million dollars?

Councilor Kennedy’s comments were more problematic, because they epitomize pointing to a problem without offering a solution.  She said that two of her neighbors had recently been forced to move out of Portsmouth because “they can’t afford the taxes.”  The sentiment is important – but the solution was absent.  A decade ago, past city councils actually proposed specific reductions in staffing levels, including in the politically difficult areas of public safety and education, in order to achieve specific targets of taxes and spending.

In both cases, voting against the budget is not, in a vacuum, the issue.  The issue is in criticizing the budget that the council ends up passing, without offering specific, fundamental, quantifiable alternatives that reach specific, defined targets of spending and taxes.  That is leadership, and it has been done in Portsmouth in the recent past.  And this November, taxpayers have an opportunity through the ballot box to say that it wants courageous, competent leadership again.

2) Expand the tax base, particularly the commerical tax base.  Ultimately, the taxes our residents pay is the result of simple math:  The amount of money we decide to spend, divided by the amount of taxable property.  Keep in mind that nobody has ever paid a property tax rate – we all pay property taxes.  The rate is simply the result of the equation.

For residents, the addition of commerical property to the tax base is one of the major advantages Portsmouth enjoys over most other cities in northern New England in recent years.  Consider this:  In the last five years where we have full data (2010-2014), Portsmouth increased it’s tax base by $279.4 million (from $3.9 billion to over $4.1 billion), bringing in another $5 million in property taxes without increasing the rate.  Further, almost all the net increase has led to relatively low increases in municipal spending – in other words, the properties pay far more in taxes than they consume in new services.  A major reason for this is because most commercial development and higher-end downtown residential development brings very few additional K-12-aged students into the local school system.  As the school budget represents well over half of the entire city’s operating budget, this alone assures that the properties are net positive for the operating budget.

However, some of the same incumbents who have been favored by the APT are some of the biggest opponents to this expansion of the tax base.  The elimination of the Conditional Use Permit, one of the most powerful tools in local government to help shape the direction of future downtown development, has lowered the future value of such properties, and helped insure that those properties will be less diverse, less creative, and less reflective of community priorities like affordable housing, public water access, sustainability, or walkability.

It is disappointing to say people’s taxes are too high, but not offer a quantifiable solution through the budget process.  It is even more disappointing to also denegrate the importance of expanding our tax base as a piece of restraining tax increases for our neighbors in need.

3)  Avoid spending money on items that do not specifically reflect the community’s highest-priority needs.  Earlier in 2015, the Council voted to instruct City Manager John Bohenko to negotiate with the owner of the Frank Jones Center property (on Rt. 1).  The latest offer for 8.77 acres the owner is willing to sell off was $9 million (the current assessed value of that parcel is $2.8 million).  Two of those who voted to continue to try to buy it were Councilors Thorsen and Kennedy – the same two councilors who voted against the operating budget a few months earlier because city spending was too high.

Councilor Kennedy defended her desire to purchase this land, as the Portsmouth Herald summarized:

Kennedy noted that by buying the property the city could ultimately sell it to developers who would agree to build affordable housing on part of the parcel. She also said other options could include putting a new police station there or “some kind of transportation center…to allow hopefully free parking.”

She urged the City Council to be “more proactive,” instead of always being reactive. Plus by buying the property, the city could “control” what the much hoped for connector road from the Route 1 Bypass to the downtown will look like.

This is remarkable on several levels.  First, the idea of purchasing a parcel of land for several million dollars without a clear idea of the purpose of doing so is very unusual – almost speculative in nature.  It could include a police station…or some kind of transportation center…to allow hopefully free parking. Taxpayers are not helped by its government playing the role of real estate investor – and fronting several million dollars in the process.

Second, this takes the property off the tax rolls.  The same person who voted against the budget three months earlier because taxes were too high wants to spend millions on real estate speculation, while simultaneously pulling taxable property off the rolls.  This is a double-whammy for taxpayers now and in the future.

Third, it is based on factually-incorrect information.  The owner of the property, who hopes to develop it in the near future, has already stated that he would build the connector road and convey it to the City of Portsmouth.  The plan also includes over 100 units of microhousing.  The city already has a fair amount of control over what can happen on the parcel, and the developer is willing to pay for the connector road.  Why would the city pay for it (in addition to the cost of acquiring the land)?

Meanwhile, Councilor Thorsen commented in the same article:

Thorsen acknowledged he was “really quite surprised” that the city received a $9 million price tag for only part of the property.  He noted the owner wants to keep the front part of the property while trying to sell “off the worst part of the property.”  “Obviously it’s not a deal we’re going to take,” Thorsen said.

He suggested that if the city ends up buying the property, they could “carve out the pieces we need” and sell off the rest…He asked Bohenko to make a counter offer and “be aggressive,” but the council did not suggest a number for the counter offer.

What would be an aggressive counter offer, given that the property is assessed at $2.8 million, and the developer asked for $9 million?  If the owner is trying to sell off the “worst part of the property”, and then the city would “carve out the pieces we need” and sell off the rest, what price would the twice-discarded property reasonably be expected to fetch?  How would Councilor Kennedy’s (now former) neighbors feel about these decisions?

Keeping residential taxes low is not easy, but it is simple.  First, you have to offer specific, quantifiable alternatives to default budgets, and then you have to advocate for them.  Second, you have to simultaneously expand the tax base, especially the commercial tax base, to take the pressure away from residents.  Third, you have to avoid spending on one-time ideas that are initially attractive, but can make it very difficult to achieve steps one and two.

One Portsmouth is supporting eight great candidates who will not always agree, but who will be thoughtfully consistent and analytical on these and other issues.  Their collective skills and analytical ability provide the community the best chance of achieving the important goal set by the APT.  Being concerned about residential taxes is laudable – but unless such words are coupled with like deeds, it does not help our neighbors in need.