- $1 billion of property value lost in decade-long rout
- Half the town is in for a surprising tax hike in the New Year
- Critical moment for staying competitive with neighboring towns
What happens when a town’s revenue base declines for a decade while the government goes on a spending spree?
We’re about to find out.
Home Value Rout
For revenue, New Canaan’s government relies on taxing property. That property is getting reassessed much lower—with a proposed assessment decline of more than $500 million representing a fair market value loss of almost $750 million. On average, more expensive homes have declined the most, with the assessment of homes previously assessed at between $2 million and $5 million declining by 10 percent. At the same tax rate, those property owners will pay for a smaller percentage of government spending as a result of that decline. A majority of New Canaan homes were previously assessed at under $1 million. Their new assessment shows an average 2 percent decline. These 4,200 New Canaan property owners are about to get hit with a tax hike necessary to pay their greater share of the tax burden combined with the greater government spending. Many rates will increase by more than 10 percent.
Government Spending Boom
While New Canaan’s revenue base is in decline, its government spending is booming—rising each year over the past decade without any pause for years with declines in economic growth and population. New Canaan is number one in Connecticut in government spending and debt per resident. The government’s consensus solution to the decline in property values is to keep the government growing by hiking tax rates. A recent survey of New Canaan government leaders indicated that 81 percent think that more government spending is acceptable to taxpayers, 15 percent think that the current level is acceptable, and 4 percent believe that less spending is acceptable.
Neighboring Town’s Lower Rates
In comparison, Darien decided to lower its tax rate last year. After our respective revaluations, New Canaan’s rate will by around 19 percent higher than theirs. For individual taxpayers, this difference might not be too consequential. You may not mind paying higher taxes, but the cost is not a matter of a few thousand dollars of taxes each year. The real cost is that the marginal demand for our town could dramatically decline as the value proposition becomes relatively less attractive. Lower assessments plus higher government spending equals a tax rate that makes our town less competitive than our neighbors.
Critical Time for Better Decisions
The bad news is that this creates a feedback loop that will lead to further degrading property values. The good news? This feedback loop works in both directions. If the government reverses its current course on spending, we can lower tax rates, become more competitive, and drive property values back up. We are not dealing with forces of nature; we are dealing with the consequences of decisions. The good news about bad decisions is that we can turn things around by holding the line on taxes and spending in order to make our town more competitive. If we decide to keep our tax rates beneath neighboring towns, our town will attract more demand, and our after tax market value will rise.
Chris you are a very smart !!!!! All things are not equal — seems the country club assessment went down 11 million — some high end homes
24-34% down — a lot to look at — it will be a while to look at all the data
at the meeting they said commercial went up and condo’s went up
otherwise the residential alone went down more then the $500 million
Thanks Chris. It sounds like you’re saying that if a property’s assessed value has now been determined to have, for example, decreased 4% during the October 2013 – October 3018 time frame outlined in the revaluation letter we’ve all just received, then taxes will go up accordingly. But how will this work if taxes are based on the mill rate? (I may be misreading your letter, thanks.)
Your mill rate will rise due to our combination of lower property values and higher government spending.
Winter is coming.
Plans from Hartford: statewide property tax, divert town funds to state slush fund and end local control of schools.
When we moved from NYC to New Canaan years ago, we didn’t compare tax rates of neighboring towns. We fled a hyper-inflated housing market in the city, sought excellent schools for our kids, and wanted a vibrant, truly walkable town center. None of the neighboring towns came close. Though the real estate values out here were also inflated, we were still ahead then, and feel the same way now. Our own assessed value has dropped, but we felt we were in for a correction. Prices were unrealistic and unsustainable, even though we paid them. I worry about hinging so much on real estate values.
Those are interesting points, however, not everyone moved to New Canaan from NYC. So it’s unfair to say that real estate values shouldn’t matter by using that comparison. They do matter and the fact that property taxes are mostly not federally tax deductible further magnifies the situation occurring.
The erosion of the tax base and shifting of the property tax burden, as the writer describes, can lead to many problems. The carrying costs of certain homes increases. It could push out the older homeowner on the fence about moving/retiring.
If our taxes keep going up, we do lose an advantage versus towns closer to NYC. The commute from New Canaan to New York is awful. The difference between real estate values in “commuter towns” versus “non commuter towns” is staggering. Many people do not want to spend 1 hour+ on the train (before getting to the station or their office). New Canaan has had relatively cheaper taxes for years versus other towns (Stamford, most of Westchester, etc.). If this advantage goes away, someone can choose to move closer and have a shorter commute.
Although you may not have, I did research the tax situation and relative competitive advantage of New Canaan versus Westchester, New Jersey, and other neighboring CT towns. I commute daily so this all came into play. The lower taxes helped steer my decision and accept a longer commute. If that benefit erodes, then that’s a problem.
And this ignores Connecticut’s stupid vehicle tax. Yes, it’s stupid. New Canaanites have benefited by having a low mill rate versus other towns, so taxes on the same vehicle have been lower in NC when compared to Westport or Stamford. This benefit can also disappear. Again, NY and NJ don’t even have this tax at all.
So yes, taxes do matter. Real estate values do matter.
Sorry, wasn’t implying that real estate values don’t matter. Meant that values were extremely inflated and I’ve not been surprised that the grossly inflated price I paid for my property has dropped. Was expecting that, but taking into consideration everything I’ve gotten from NC in the bargain I’m still ahead.
Hard to argue with the writer:
Further tax increases whether they are here or from Hartford, will solidify the view that CT is an exodus state. The increased Democrat control of the State House and Senate as a result of the latest election, only assures that nothing to improve the CT economy is pending except more of the failed “tax and spend” methodology.
New Canaan residents can no longer fund endless spending. Land purchases (Valley Rd) further education budget increases..the list goes on and on. The result of which will continue the downward trend of home values further supporting he choice to move somewhere more affordable.
How right, if only the Democrats had not been in control of New Canaan all these years!….Ooops….Never mind.
Thanks @PeterBushSwanberg, just wanted to mention that if the “Valley Rd land purchase” you mention above is the 1802 house at 1124 Valley Road, this purchase is being done to preserve the house and increase open space, and will be financed by the New Canaan Land Trust, not the town or our taxes. Please see more info at: https://www.facebook.com/groups/GrupeNicholsBrownHouse/
Peter Bush Swanberg is 100% correct. My head is exploding when I see the real estate the Town of New Canaan has been picking up, considering buying, excluding properties picked up by Land Preserve Trust. I see the New Canaan Library is looking for funding to expand now. It makes no sense for the town to be in the land owning business to begin with, other than to house necessary government. Why was the Town Hall upgraded with the specter of “the Teen Center” behind it, without thinking now is an opportunity to bring the Police back to Town Hall? Why was Irwin Park purchased to begin with? Why are we discussing renovating Irwin Park? Vine Cottage and Irwin ‘park’ should be put up for sale, Vine Cottage with either residential opportunity or commercial. It seems to me that the governing decisions being made in New Canaan are not unlike an open check book these days, with raising the mil rate as a high probability.
“New Canaan residents can no longer fund endless spending.” Exactly. Our debt and taxes are already high enough.
Now is the time to reconsider our Town’s spending pattern. Let the Town Fathers..and Mothers… tell us just how they WILL moderate this unsustainable spending to keep New Canaan competitive. We who have the “power of the purse” and the power of the vote will need to take action.
Connecticut private sector wage growth: +1% y/y.
BOE proposed budget benefits growth: +5.85% y/y.
The power to tax is the power to destroy. Thank you Chris for your article.
You’re welcome, Jennifer. It isn’t too late for our town’s leaders to avoid further destructive tax and spending hikes.
An anecdotal comment…my daughter’s condo assessment has increased by a whopping 39% with this revaluation! For anyone in a condo that is an awful big change and real money out of their pocket.
It will be curious to see how the Town of New Canaan deals with this new reality. And stop blaming Hartford for the tax increases…you’re steering the boat!
Ever increasing property taxes do in fact deflate real estate prices. And while lower housing prices benefit new buyers, the unrelenting escalation of property taxes due to unsustainable increases in New Canaan’s town budget will likely scare off these potential buyers. Sure, there are still many positive attributes of our town, but the commute to NYC and high property taxes (capped at $10K for itemized filers) are two areas of concern. The train ride to NYC is advertised as 70 minutes from the town center, but in reality it is closer to 75 minutes – that’s 2.5 hours round-trip, or 50 hours a month – a pretty tough sale no matter how good the schools are. So if you desire a better return on your real estate investment, I would suggest that you vote for balanced budgets and pray that Hartford improves MetroNorth.
“Ever increasing property taxes do in fact deflate real estate prices,” is a lesson we’re relearning.
Local government ” reverses its current course on spending” should be the introduction to their announced survey and all other statements about the upcoming budget; otherwise, we are simply going to get a list of unnecessary projects that some wish for and may even be approved. We need to cut back to a zero budget increase, including BoE. The validity and justification for doing so is justified by the facts alone you all have expressed above , but there are many other reasons to do so as well…think bond ratings, for one.
Many town leaders campaigned against excessive taxes and spending in theory; now we’ll see what they do in practice.
Roger Williams statement at July 2015 Republican Caucus. It’s a shame that more voters did not take his message seriously.
Roger Williams: “Right now if you look at it, we have a $90 million, 5-year capital plan, we have a Board of Ed that’s been chugging along at 4 percent annual increases, we have a town around 2.5 percent, we have healthcare rising at 15 percent. If we do nothing—nothing—our taxes are up by 50 percent in six years. Now is the time to have a serious, honest discussion about what this town can afford, what kind of taxes we want to impose upon the citizens who live here, and then we budget back to what we can do.”
“Now is the time to have a serious, honest discussion about what this town can afford” is right.
Unfortunately Town leaders and residents have never created a plan with ConnDOT Rail to make incremental improvements to the New Canaan line in order to increase frequency of express service to GCT beyond a few weekday peak hour trains. In the meantime, service frequencies on the New Haven Line has improved measurably. This is another reason I find New Canaan to be at a competitive disadvantage vis-à-vis other bedroom communities, such as Darien and Greenwich.
And becoming uncompetitive with Darien’s mill rate would lead to lower home values and even higher taxes.
The reval reveals serious problems with declining home prices and increasing government spending. So what are some solutions?
96% of our current municipal leadership recently indicated that the current level of government spending or more government spending is acceptable to New Canaan taxpayers. If that question is fairly submitted to those taxpayers in the upcoming town survey, it is unlikely that it will show 96% of taxpayers to be quite as enthusiastic for tax hikes and spending hikes.
Instead, to protect New Canaan taxpayers, we should:
1. Immediately freeze discretionary spending.
2. Reduce our mill rate beneath neighboring towns through attrition over the fiscal year.
3. Refocus education spending around the classroom.
We can reduce non-teaching expenses – duplicative back office headcount, extra (recently renovated) real estate for layers of non-teaching bureaucracy, and excess de facto compensation beyond the union contract. Let’s get Education out of the finance business, PR business, and real estate business and refocus it on the teaching business. We could split savings between the taxpayers and the classrooms so that homeowners get relief while students benefit.
Are your taxes about to rise? Please leave a comment on New Canaan’s tax and spending hikes.
The Town of Darien elected officials one year ago speaking of their budget…
In the past year, the town ( of Darien) has been taking steps to keep itself attractive to potential home buyers and fiscally fit. That was another strong theme of Stevenson and Zagrodzky as well as the other two State of the Town speakers: Planning & Zoning Chairman John Sini and Board of Education Chairperson Tara Ochman.
a quote from Darien’s budget meeting one year ago.
Wouldn’t it be nice if our New Canaan officials, elected and appointed, had the same mindset? I am not hearing that from any of them…something needs to change.
New Canaan should take steps necessary to beat Darien’s mill rate. If they can govern responsibly, we can too.
Chris–this seems to be a hot topic and I am interested to hear your thoughts about education and budget. As New Canaan has no real industry what do you feel keeps our real estate values as strong as they are? It’s that education is the driver for New Canaan’s economy and cutting spending in education will come back to bite the Town in the near future. I would think you have shorted New Canaan in the longterm market based on some of your comments. You are correct in your view that New Canaan might have too many Town-owned buildings—but when the issue of selling or repurposing those 28+/- buildings are raised it seems few residents are in favor. While being fiscally conservative is where we should strive to be—we have to make sure we don’t over correct.
Thanks for commenting. The long-term depends on the choices we make. There is time for a course correction.
Arnold, while educational quality is strong I and many others believe there is an opportunity to save millions in the BOE budget with little to no impact on classroom learning. I would encourage you and others to do more analysis if that sounds pie in the sky, or I can provide anyone with analysis that myself and others have done if you email me at jdb435@nyu.edu. Don’t presume there is isn’t significant waste or inefficiencies in any government body, whether it’s New Canaan or elsewhere. Unfortunately, any analysis of the BOE is compromised by a lack of granular breakdowns in budget line items. For example, a granular breakdown of money spent for conferences, travel, administrative retreats, outside consultants, tuition reimbursements, etc. I gave a speech at the last BOE meeting where I give a short list of examples of areas of concern, including:
• Increasing full time equivalents by 9% over the last 10 years while enrollment is up 2%.
• At current spending of $22,000 per student we could maintain the same ratio of full time equivalents per student and realize over $2 mm in annual savings from the decline in students over the last two years and a further $4 mm if NESDEC’s projected enrollment declines over the next 3 years are close to accurate.
• Spending $975,000 on renovations to leased administrative offices ahead of a planned move when we have 57 town-owned properties.
• Hiring outside consultants for over $30k in one year on social-emotional learning programs when we spend close to $2 mm a year on in-house psychologists and social workers.
• Not allowing a Town Council member to even observe labor negotiations when BOE wages and benefits consume half of taxpayers’ dollars.
• Two separate “Administrative Retreats”-– one on Emotional Intelligence and the other a Happiness Workshop — at an expensive restaurant in Darien with a publically undisclosed specific expense. With all of this spending on wellness initiatives that have questionable efficacy, why are we dragging our feet on the school start time initiative that has proven efficacy?
• Outside of expense savings there are revenue opportunities from having a least a dozen empty or “underutilized classrooms” that hasn’t been discussed.
Perhaps the BoE could move its “Happiness Workshop” from an expensive Darien restaurant to an expensive New Canaan restaurant.
Arnold — teach more students and make money — thus cutting the tax burden — I showed how the BOE could bring in millions ($6 million) by
opening our schools to out of town students (which we do now
for out of town teacher students) We have 27 empty classrooms just in K-4 and NESDEC says we will have 1,067 in Saxe in 10 yrs
Lets all stop just increasing taxes if we can find a better way
The TC members who are pro spending on schools have embraced
this new potential source of income (asking questions) looking into it– the alternate HS will bring in outsiders but only make $150,000 a yr
Your people were clear when they took up the the question of increased students as part of you 100+ condo’s — they said ” the state say NC
student age populations will decrease by 34% in the next 10 yrs”
I wonder who gave you that info?
Richard, you wrote a very good op-ed on the BOE and the empty classrooms. I have a couple of questions – what were the knock on effects of the projected increase? Were more teachers hired to support the new classrooms and estimated increase in students? More computer equipment purchased? It seems this should cut as this is low hanging fruit as the projected increase never materialized.
well the population did increase from around 15,000 to
19,000 over the last 30 yrs — so there were many increases in the BOE budget — main reason increase students — but the BOE has never ever look to lower cost — I remember
when I was still working that they spent $250,000 to wire the HS for the internet — only years latter they went to wifi
But the thing about the $250,000 back then was I question
the cost — at GE capital we had a contractor wire the whole
building at longridge for $60,000 — So a good question
to ask is why do we seem to pay more for everything
We need one purchasing manager for both the schools and the town
It appears that taxes / valuations assessment / on condos and homes in town are going up although these properties actual values are going down , while the estates and large homes taxes are going down. These large properties almost have no value in a potential buyers mind right now .
Result real estate market will worsen and the end result will be that an even greater than now percentage of people moving in will look to rent. We will in essence become a renters town. That is a huge problem for a variety of reason. Renters take less interest and involvement in the town, the school, the churches , the towns programs , all we have to offer. They tend to take and not give.
Thank you for posting a comment, Mimi. I must say I find the comment on those who rent in New Canaan a gross and inaccurate generalization. The renter’s market caters not only to those who are waiting to buy but also to those who cannot afford to buy home here or for whom home ownership simply doesn’t make sense. These often are people deeply invested in the community, with kids or grandchildren in the system, who coach or cheer from sidelines, serve on local boards and commissions and help run nonprofit organizations. I would also add that rent from tenants goes to property owners who pay mortgages and taxes. Dividing residents into owners and renters is unhelpful, false and small, though we may acknowledge that one type helps real estate professionals more directly than another. New Canaan is a community inclusive of everyone here—as the newly created Tourism & Economic Development Advisory Committee shows, that also includes people who run important organizations who reside beyond the town line.
Interesting — I found out 2 yrs ago from the BOE
family move in but they also move out — it’s net migration
to my surprise — about 240 students move out of town each year
and are replaced by 240 plus or minus — 240 would = lets say
2 children per family — so about 120 family’s decide to move out of town
That number may have gone up — what we should find out is why?
These are not empty nesters moving out
it would be good to know — taxes to high? – schools not what
they thought they were? or other reason like jobs moving
Saxe does have this odd thing — the 4th grade does not all move to 5th grade — on average -21 from the 4th grade to 5th grade — if we are going to fix the problem it would be nice to know what the problems are
We have better ideas than a tax hike; in fact we voted for better ideas:
“… I’m willing to be the “tightwad” who tries, and I have a list of ideas to pursue.”
– Tom Butterworth
“We have to be fiscally prudent regarding our Town budget. I support zero-based budgeting and would parse line items to verify reasoning for spending increases, and communicate that to the public.”
– Liz Gores Donovan
“Figure out how to have excellent schools, fresh paving and a new library within a zero growth budget… New Canaan is fourth lowest mil rate. One year of zero growth budget and we can be top three again.”
– John Engel
“I favor limited spending.”
– Rich Townsend
“Our Departments are committed to tight budgets while dedicated to providing services at a level expected by our citizens.”
– Penny Young
Chris-
Those quotes should be in a newspaper ad prior to budget deliberations as a reminder to them and those who voted them into office.New Cannan’s only industry..real estate..is in a deep recession and now is not the time to talk about any increase in taxes…or buying/building new buildings. We have over 50 versus Darien’s 6.
We voted for “tightwad” “fiscally prudent” “zero growth budget” “limited spending” “tight budgets”; hopefully we’ll get it.
Well written, Chris. Hopefully New Canaan’s leadership will live up to its promises.
Thanks for the encouragement. We have a frugal private sector and booming public sector; perhaps they can switch.
A statewide property tax plus New Canaan’s continued spending hikes could mean mill rates over 20 within a year.