Op-Ed: Large Property Tax Increases or Fiscal Prudence?

Dear New Canaan Residents,

My name is James Basch. 

I recently informed our town government bodies that I plan to pursue a budget referendum if our property tax mill rate in the upcoming fiscal year is increased by more than 4 percent.

A referendum will compel reconsideration of a budget by the Board of Finance. It requires that 5 percent of town residents registered to vote (roughly 650 people) sign it. The town of Meriden successfully passed a referendum earlier this year after their town government proposed a 4.66 percent property tax mill rate increase. 

The context for the referendum draws on a key fact: our town government continues to increase operating expenses in the face of rapidly declining real estate values and thus, lower revenues from the property taxes that comprise the vast majority of the town’s funding. The extent of this decline will be determined by a five-year real estate revaluation being done this month. 

In March of this year, our first selectman projected that “Grand List could be down several hundred million dollars” for FY 2019-2020 after the revaluation. Several hundred million dollars represents a high single-digit percentage decline on a Grand List of approximately $8.3 billion. 

Though I do not know as of the time of writing this what the end result of the revaluation will be, it is common knowledge that the real estate market in New Canaan continues to deteriorate (for example, September real estate transactions in New Canaan were down 50 percent year-over ]-year). 

The upshot is that unless town authorities change course and start cutting overall expenses, they will likely look to offset a decline in funding by increasing property taxes several percent. 

My main point in potentially pursuing a referendum is that a fiscally responsible business owner or home owner would cut total operating expenses in the face of significant forecasted revenue declines over the next five years, so why should our town representatives manage our tax dollars any differently?  

This potential mill rate increase will not affect all residents equally. The distribution of the tax burden will be regressive: owners of high end homes may see their tax burden go down, while a greater number of owners of lesser valued homes will see their tax burden go up by a double digit percentage. Our Town Council chairman, John Engel, recently stated that “many tax bills will be up 10 to 20 percent.” The median increase in the local tax burden will likely be meaningfully higher than the average tax burden increase. While homes should be reassessed to their current market value and I am glad John is being transparent, significantly increasing the tax burden of most residents is unacceptable without taking an aggressive approach to expense management. I am confident that many residents will feel the same once they become aware of it.

The pushback from some representatives will be that it is difficult to cut expenses when the fixed-cost portion of our town budget is steadily increasing due to unionized contracts agreed to be our town government. Specifically, roughly 70 percent of our town budget goes to education spending. Our Board of Finance (BOF) approves the overall appropriation to the Board of Education (BOE) after an initial request of funding from the BOE and a review process by other town government bodies. The BOE allocates the dollars from that appropriation. The BOE also negotiates teacher salaries. Our BOE recently approved fixed salary increases for most unionized teachers over the next 3 years of 4.5 percent per year — well above the rate of wage growth in other industries and the overall inflation rate in the United States of roughly 2 percent. 

It would entail some hard choices, but a flat BOE budget is a fiscally responsible step and an important signal to unions that if this degree of wage and benefit increase continues we will be forced to cut back on the number of quality educators and administrators that work with our kids, along with the number of programs our kids have access to.  

Similar to the dynamic facing our state, public union salary and benefit contracts that have been out of whack with private sector comparables for decades are crowding out spending on classroom education programs, health care, social services and infrastructure. Our BOF chairman, Todd Lavieri, wrote a thoughtful analysis earlier this year discussing the needed basis for more fiscally responsible education spending, including this data point for context: over the last 12 years enrollment in New Canaan public schools is up 4 percent while education spending is up 35 percent and employee headcount is up 9 percent.

Our educational outcomes in New Canaan are consistently excellent so many will worry that even stabilizing—not decreasing—spending until the economic picture improves will be damaging.  However, the idea that a flat BOE budget will cause a statistically significant change in educational outcomes has no basis in reality.  Two long-time education researchers, Emiliana Vegas and Chelsea Coffin, published a 2015 paper in “Comparative Education Review” stating that in regard to standardized math scores, “Our estimates of the association between education expenditures and mean student learning outcomes in mathematics suggest that, when education systems spend above US$8,000, the association is no longer statistically significant.” A multivariate regression analysis published by the American Legislative Exchange Council in 2016 reflects that, “for every $10,000 of per pupil expenditure, graduation rates increased a mere 0.03 percent when controlling for other factors.”

New Canaan—at roughly $21,000 per student per year—spends almost double the national average per student. The town of Hamden spends roughly the same amount per student as us, yet their educational outcomes are vastly different. Myriad factors lead to good educational outcomes—many of them focused on prioritization of education in the family, involved parents, a functioning family unit, and a high achieving peer group among kids—with dollars spent just one factor.  I say this as a parent of young kids in New Canaan’s public schools who cares very much about the quality of my kids’ education.

There are additional possibilities for town expense cuts outside of the BOE within an approximately $150 million overall town budget. For example, we have 57 town-owned properties that we pay maintenance expenses for. This number dwarfs that of surrounding towns. Do we need all 57 in this fiscally constrained time? Can we sell some and pay down our debt—the highest debt per capita in the state of Connecticut—and reduce our overall expenses? Can we reduce our town capital expenditures to only maintenance projects? Are there areas in the town operating budget that can be reasonably reduced given the fiscal context? 

The greater question for our town is: Can we manage to align our spending with declining funding sources, and hold ourselves and our representatives to this standard, or should we rely on large tax increases going forward to close this gap? Every town representative I have met seems well-intentioned, cares deeply about New Canaan, and is hard-working. I hope they recognize that greater fiscal prudence in the current environment is necessary for the long-term health of our town and do what is necessary to achieve that.