Op-Ed: New Canaan Housing Collapse?

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Congratulations to Connecticut Democrats on their trifecta in Hartford—our new Democratic governor will be utterly unconstrained by Republicans in any position of authority. In fact, any effective pressure on Governor-elect Ned Lamont will all come from his left. Progressive voices in both the upper and lower chamber are now a majority of the majority party. 

What does that mean for New Canaanites?

The most immediate impact is likely a tax hike by the middle of next year. The top marginal rate (the one that matters when it comes to economic growth and incentives) will get a big hike. The direct impact will be a bigger tax bill. The indirect impact will be an acceleration of businesses and taxpayers fleeing Connecticut for states that want them. Meanwhile, how many net taxpayers do you know—individuals or businesses—who are moving to Connecticut? Not nearly enough to make up for the losses.

The next impact will be a massive shift of government pension liabilities from the state to the towns such as New Canaan. Connecticut is broke and it was broken by pension liabilities. For decades, the easiest thing for politicians of both parties to do was to increase government headcount while racking up future pension obligations. The future has arrived—the state can’t afford it, so it will hand its obligations to our towns. New Canaan is Connecticut’s piggy bank and Hartford is heading our way with a hammer.

While our taxes and liabilities are heading in one direction, our state benefits will head in another. Tax revenues that had gone to Connecticut’s economically functional towns will be redirected to Connecticut’s economically dysfunctional cities. This will cost us dearly in direct costs but will prove to be doubly expensive as redeployed funds will stymie the need for reforms that would otherwise save our cities from their self-imposed insolvencies. In particular, we will buy out $550 million of Bridgeport and Stamford debt. The lesson is clear: the more you spend, the more bailout money you get. The more revenue a town can raise, the more they will take. Think of the $550 million as a down payment; these bailouts will continue until they run out of our money. 

In short, we are about to see a lot of our wealth redistributed among the people, businesses, and towns that earn it to pay for the state government’s unlimited appetite to spend it on those who do not. 

If our newly elected local representatives were marginal votes in the newly elected legislature, they could be moderating influences, but with huge new majorities, their votes are not needed. Taxpayers can continue to vote with their feet, but for those left behind, we will see a double-digit adjustment to our property values as markets reflect this new reality (simply adjusting for the after tax net present value). 

Government workers who get to skim the overhead and net transfer payment beneficiaries are the big winners while New Canaan is the big loser. In wiping out the few remaining checks and balances in Hartford, New Canaan has practiced a form of economic masochism with costs that will be revealed when you see you state and local taxes next year. If the bond market begins to reflect our precarious position, borrowing costs would rise enough to necessitate further tax hikes. We are only putting off a crisis by hoping the municipal bond market doesn’t notice anytime soon and when it does, the crisis will be smooth and controlled.

So what? So we can take into account a future with much lower New Canaan property values. There are a few things we can do locally. As homeowners and taxpayers begin to notice, our well-intentioned local government is going to catch a lot of flack for upcoming tax hikes. To mitigate taxpayer outrage, they might choose to clarify responsibility by sending out line items on our property taxes that show the large and increasing percentage of local cost that are disguised state costs in the form of unfunded mandates. That can be separated out from the classrooms, police, and parks that have any real benefits. If necessary, we can push back against ever increasing local spending via referendum. There is nothing we can do at the state level. It will be increasingly clear that our only recourse is local; in Hartford, New Canaanites are powerless to stop a bankrupt and desperate state from coming after our town with a vengeance. 

27 thoughts on “Op-Ed: New Canaan Housing Collapse?”

  1. On one Christmas eve (1900’s) congress voted to pass the income tax
    it was at 1% — CT passed the income tax in 1990’s
    fast forward to today you have to wonder how we ever survived before
    granted a lot of good has come from the transfer of wealth but
    will this all end well when government can not control itself

  3. I’m an unaffiliated voter and certainly never in favor of large tax increases, but this piece reads less like an op-ed and more like histrionic conjecture from a sore loser. It’s a fantasy doomsday scenario, all baseless fearmongering without any admission that Connecticut’s fiscal problems are two-party in origin.

    With a Republican local government in place, our town’s mill rate has increased year over year since I’ve lived here. And because of our charmless president, we can no longer write off our state income taxes or our mortgage interest against our federal income taxes. Republicans in 2018 are HARDLY fiscally responsible, and the moral implications of voting with a racist, pro-gun party are untenable to me. It’s oversimplifying to the extreme to call New Canaan “Connecticut’s piggybank” and it belies a shameful lack of empathy to not wish to share our overabundance of wealth with the have-nots in Bridgeport or Stamford.

    Thankfully, this is not the New Canaan I know.

    My family has lived primarily in California and New York. We have faced much higher income tax rates than we do here in Connecticut, and yet people flock to those states, year after year, increasing the tax base. If Fairfield County faces a housing collapse in the future, I suggest it’s because nobody wants to live next door to such paucity of spirit.

      • Thank you, Chris. And if the scenario you describe above ever seems imminent, then we should all agree to work together across parties to keep it from coming to pass. I don’t want to lose my investment in New Canaan any more than you do, and I never want exorbitant taxes. But I hope we can give this new government a chance.

    • New York has been losing population fro decades and California has the highest per capita welfare benefits in the country. New York City is a magnet for foreign capital as a place to stash their dough and California has an enviable pool of venture capital and talented entrepreneurs. The Nutmeg state has none of those attributes to keep it afloat.

  4. “From everyone to whom much has been given, much will be required; and from the one to whom much has been entrusted, even more will be demanded” (Luke 12:48).

  5. This article states much better than I ever could why I disagree with this perspective.

    https://www.bloomberg.com/opinion/articles/2018-10-25/housing-market-is-tanking-in-the-northeast

    Also, New Canaan has been with a solid republican leadership for as long as I can remember and our taxes have gone up each year. It’s definitely a complicated issue and the new party ID of the members of the state senate and congress aren’t going to be some wildly combustable doomsday scenario. I wish Mr O’Dea, Mr Haskell, Ms Dathan and Ms Bergstein the best of luck and an open mind in working together for our town.

  6. Ms. Ault, Since you are new to the state , you may not know that we do in fact have one- party rule in Connecticut. While it is true we have had Republican governors in the last 30 years, we have not had a balanced Legislature. It has always been controlled by the Democrats, who are in turn controlled by the state unionized workers. The financial problems the state is facing are now on them 100 percent. And when you calculate exclusions and income tax brackets, our taxes are very much comparable to NY. Connecticut must compete for its citizens and businesses, and lately, we are not doing such a good job. And maybe you haven’t lived here long enough to meet any Nutmeg Republicans: I assure you we are not all “racist and pro-gun.” Liz Mao, Darien

  7. I am in total agreement with Mr. DeMuth’s assessment of the consequences of the election. Connecticut has been heading in the wrong direction for decades. Sadly, voters rejected their best chance to right the fiscal mess we are in. With Democrats now in full control, it will all get worse.

  8. Ms Ault,

    In fact, California has had a net loss of residents to mostly low/no income tax states, such as Texas and Florida. CT, likewise, has witnessed a large exodus of residents in recent years, particularly those in higher income tax brackets. In fact, the governor of Florida joked that his favorite governors were from CT, NY and CA, as so many of their residents move to Florida each year to escape high income taxes.

    I take great offense to your calling Rebublicans racist. Perhaps you should consider taking a less hostile, inflammatory tone, lest you be likewise labeled “charmless”.

    • Ms. Raleigh,

      You’re right, California does see some exodus. I stand corrected.

      I don’t mean to say that all Republicans are racist, but honestly, I’m not sure how to excuse people who support the current presidential administration from guilt by proxy. Either you accept everything that vulgar man stands for, or you don’t. I choose not to.

      Call me charmless all you want. I sleep pretty well at night.

      Laura Ault

      • OOOOPs! don’t know how to fix my mistake, but I was replying “well said!”to Laurie Raleigh, not to Laura Ault.

  9. I just have to say – I am REALLY tired of people calling all Republicans racist. It’s not true. Our family values have been passed along to our children, teaching them to treat all human beings as equal, to be kind, compassionate fair and help others whenever you have the opportunity to do so. So whatever criticisms you have about economic policies, please leave the “racist” remarks out your editorials. I find it extremely offensive and it’s horrible to lob that accusation at people you don’t know and have no knowledge about how they live their lives as individuals, simply because they are fiscally conservative.

  10. I’ve always noticed that the best indicator of Connecticut’s economic health is the number of “For Sale” signs as I drive into work.

    I agree with Barbara Newman and Laurie Raliegh. And I am stunned about people protest voting against our President on matters that are strictly local. Brilliant. Glad you ate the pablum. Hope it sits well.

  11. Laura, it’s frustrating to see someone who spent time to compose an Op-Ed and who has enough backbone to publicly disseminate it be responded to with such ignorance and a gross generalization that an entire party is racist. If you want to make an argument that Trump is racist backed up by examples, fine, but spare us the racist party generalizations.

    Trump wasn’t on the ballot in CT. Trump didn’t cause the fiscal mess we’re in. One party rule in the General Assembly for 41 of the last 43 years caused it, and it seems like you and many others voted for more of the same failed policies in CT to buffer against Trump when no local politician I know is anything like him.

    I am an Unaffiliated voter who finds your polemic attitude as emblematic of what is wrong with our balkanized politics in 2018. If a Republican wrote something similar, you would probably demand an apology, but I’m guessing one is not forthcoming from you. There is no actual data in your response, so how about we look at actual data to see if your argument holds any water?
    1. In the fiscal year 2015-2016, IRS data shows that over $3 billion of net adjusted gross income migrated out of the state of CT to other states, with over 90% of that net migration from families making over $200,000. Note that this net migration and the resulting detrimental impact on house prices in CT started well before the SALT deduction cap.
    2. Fairfield County real estate prices are down roughly 25% over the last 10 years, not inflation adjusted. Inflation adjusted the real price decline is over 40%. Talk to some local real estate brokers and get some feedback on what they are seeing and what is causing it. There are larger average declines in more affluent communities in Fairfield County, with many houses in New Canaan selling this year at lower nominal prices than where they were bought over 15 years ago.
    3. You took offense to Chris referring to New Canaan as a “piggybank” for the state. Seems like an accurate characterization to me. New Canaan sends roughly $250 million in tax dollars to Hartford. We get around $1 million back from Hartford in the form of grants, infrastructure subsidies, and the last vestiges of the education cost sharing formula. Do you think it would be more “fair”to send $300 million to Hartford, or perhaps $500 million? What’s the “fair” number?
    4. CT’s economy is smaller than it was close to 15 years ago, in 2004. Last year CT ranked 49 out of 50 states in economic growth (it was actually a decline year-over-year). We did beat Louisiana however! Yay! Maybe that’s causing the “paucity of spirit” you are referring to.

    I could go on but you get the point. With those types of results, who wouldn’t want more one party control of our legislature!

    Chris is right that we have little to no recourse regarding the state, but we can hopefully affect change locally. That means the people in our town government who called themselves fiscal conservatives before elections actually need to act like fiscal conservatives now more than ever. If they don’t, we will get a 8-10% property tax increase next July (2%+ increase in the Board of Finance FY19-20 operating budget guidance in addition to -6% revaluation of the Grand List). Talk to our town government reps. Show up to Town Council and BOF meetings. Act!

  13. you should know -594 students by 2028-29 -14.4% that’s what the current projections by NESDEC given to BOE on 11/05/18
    594 less students = 31 less classrooms and teachers
    will are taxes keep going up in New Canaan ct

  14. Ms Ault

    You are no more an “independent” than I am a racist. You are a progressive in intentional masquerade. It is exactly that elitist, alt left, overly broad, “I know better than you who you are and what is best for you” attitude that resulted in Donald Trump’s election. MAGA