Are New Hampshire Taxpayers Being Sold A Bill Of Goods?

There's no doubt that the broad-based taxers in the Legislature are trying once again to saddle the residents of New Hampshire with an odious and regressive income tax, all in the name of “fairness”. There is no such thing.

The reasoning behind such a move sounds reasonable, until you look at the fine print as well as the history of every state in the union that has claimed the same motivation for introducing such a tax.

Much has been said and written about the tough fiscal times facing New Hampshire state government.

Many observers agree that budget cuts alone cannot solve the large and growing deficits. Revenues will lag behind currently approved expenditures this fiscal year by another $100 million, and there are credible predictions of a $500 million deficit, given current service levels provided by the state, for the biennium beginning July 1, 2009.

The current economic crisis amplifies the structural deficit in our state's tax system that thoughtful analyses, such as several papers published by the New Hampshire Center for Public Policy Studies, have identified for many years.

As pressure grows to bring the state budget into constitutionally-mandated balance, there is only one significant way to maintain service levels, and that is to cost shift state obligations to the counties and local communities. When that happens, there is no choice but to raise county and local property taxes, which are already reaching confiscatory levels in most areas of the state.

Sounds like they have everything figured out, doesn't it. But the cause of the problem stated above is not a shortfall in revenue. It is a budget that overspends, outlaying more money than the state has available.

Of course the taxers' first response is to do something about the revenue problem, mainly jiggering with the tax code to wring more money out of the taxpayers, rather than taking a hard look at state expenditures. Oh, they couch it in terms of 'bringing tax relief to beleaguered property owners', but it is a lie. What's worse, it's a lie they believe. Here's one of the things they're proposing:

A statewide education property tax is set at $5.50 per thousand dollars of equalized valuation, with a homestead exemption of $200,000 provided for every principal place of residence. In other words, there is no tax on the first $200,000 of tax valuation.

A flat 5% education income tax is levied on New Hampshire taxable income, with exemptions of $15,000 for the taxpayer, taxpayer's spouse, and $10,000 for each dependent of the taxpayer. There is also a credit for the entire amount of the statewide property tax paid on the primary residence of the taxpayer. A renter's credit is also provided.

Proceeds of the statewide education property tax and the education income tax are dedicated to funding the state's obligation to public education.

Sounds great, doesn't it? But the revenues collected won't be spent for property tax relief. Instead, at some point the Legislature will look at those revenues and decide there's better uses for the money. Property taxes will not go down. Expenditures will go up. And the tax burden on the people of New Hampshire will be much higher with nothing to show for it. Also, the 'education' money doled out by the state will have so many strings tied to it that local control of our schools will disappear.

How is it I can say this? It's quite simple: history.

Every state that has tried this has ended up with no property tax relief, little additional funds for education, more state employees, and less capable schools. Every state. One of the most recent examples of this is New Jersey.

The income tax was being sold under the same banner as the taxers of New Hampshire are doing: property tax relief and more money for education. What they ended up with was higher property taxes, an income tax, not as much money for schools as was promised, more state control of the schools, and a lot more state jobs (most of the jobs created in New Jersey in the years since the income tax was imposed were state government jobs, not private sector jobs). Do we really want to do that here? (Yes, I know there are quite a few hoping for just that. After all it gives them more control over our lives and our money.)

It is time for the state to live within its means. The Legislature must roll back the 17.5% budget increase of the current biennial budget (which added ~$425 million in state spending with nowhere near the revenue to pay for it). Governor Lynch has already stated layoffs of state employees are 'unavoidable', meaning he's looking to cut more state spending. He's also vowed to veto any broadbased tax proposal that lands on his desk. (We'll see, assuming such a bill ever makes it off the legislative floor.)

A Response

From Jack Stephenson's letter posted at GilfordGrok, about the proposed geothermal HVAC system for the Gilford Police Station project:

To Gilford voters, Selectmen, and Police Facility Committee (FPC), 1-21-09.

I’ve been searching for information to justify using geothermal energy here in Gilford with the coldest ground in the USA. Can’t find any. The best data I can find says that if the ground water is at 45 deg F then the heat you get is only the heat of electrical energy you put into the pumps, and the ground water in Gilford is 40 deg F or less. It is thus easy to understand that our Selectmen rejected geothermal heat for the Town Hall when shown that just the interest on the investment to install it was double the cost of current oil heat.

How then is it possible that the FPC decided to use geothermal heating, when their big goal was to reduce costs? They have not shown us any data to justify that outrageously high cost. The new library has geothermal heating, and the only information we’ve gotten so far is that it is difficult to regulate. Absolutely nothing about cost versus return.

The Town hall uses hot water heating to radiators, the healthiest heating system, since it avoids blowing pollutants, dust, pollen, mold spores, etc thru the facility. The FPC shows using expensive heat exchangers, blowers, and steel ducting to distribute the heat. Where is the economic justification? Just "business as usual, damn the cost, full speed ahead"?

More amazing is the use of just one well, and return cold water going back side by side with the pipe for ground water (thus chilling it), and then back into same well. Seems like sci-fi magic. For less than 2% of the cost for geothermal installation they could insulate enough so they could heat for 5% of the geothermal operating cost!

Jack

NOTE: I must say up front that I am not responding to Jack's letter as a member of the Gilford Facilities Planning Committee. This is not a response sanctioned by nor known in advance by members of the FPC. This is my personal response to Jack's series of disparaging and misleading letters to the newspapers in the region.

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Unfortunately, Jack has got it wrong.

Since he seems to have trouble reading the “incomprehensible plans” for the police station project, let me enlighten you.

First, the geothermal system will not be using ground water as Jack defines it as the water source. The geothermal well will be a 1500 foot standing column well, not the shallower well as originally envisioned.

At 1500 feet the temperature of the surrounding rock, gravel and water is a balmy 50 degrees. At 200 feet the water temp might be 40 degrees, but not at 1500 feet. My proof? The geothermal wells at the library and at the Audubon Society's Prescott Farm. The same is also true of the geothermal wells at the Merrimack County Nursing Home. They run approximately the same depth and the temps at the bottom of those wells is about 50 degrees.

Second, in regards to the "ridiculously high costs", where does he get his numbers? The upfront costs are indeed higher. That was understood from the beginning. The payback period from the system was estimated to be 5-7 years based upon oil costs of $2.20 per gallon. The actual operating costs are a fraction of traditional combustion-based/external heat exchanger HVAC systems, like the one that presently exists at the town hall/police station. So are the maintenance costs. (Combustion systems require more maintenance, as does equipment exposed to the elements 24/7.)

Jack says it is difficult to regulate. Does he base this claim upon what was said by Katherine Dormody at the Board of Selectmen meeting on the police station bond? If so, he didn't listen very carefully. Because the library is using radiant heat and not a baseboard or fan-coil based system, it takes longer for the temp in the library to go up in the morning, meaning they've been trying to 'speed things up' by setting the thermostat higher than needed. The temperature then overshoots. They have since learned they should set it for the temperature they want and to leave it there. (BTW, this is not a problem unique to geothermal, but to radiant heating, regardless of the heat source.)

Third, the geothermal system will be using fan coils not all that different from those presently used, but they will be ducted into the various zones (the ducts don't run the length and breadth of the building). Each duct services one fan-coil, each services one room or area. This is not a central forced hot air/cooling system. It is more accurately a hydronic air system.

Upstairs will have 13 heating/cooling zones. Downstairs will have 9. Heating or cooling water will only be directed to the zone calling for it, not to all zones much like the present system.

For more comprehensive look at geothermal, go to the FPC website.

There are links to articles covering the concept, a presentation by Water Energy (a geothermal engineering firm) as well as a chart showing the heating/cooling cost differences between geothermal and conventional systems (oil, natural gas, propane, electric)

Read them yourself and make up your own mind.

Small Town Democracy In Action

It's that time of year again in New Hampshire, where budgets for towns, their schools, as well as the counties and state are being debated, gone over with a fine tooth comb by selectmen, school boards, budget committees, and legislators, and debated some more.

Next month town and school district meetings will start throughout the state, where the voters will once again have the opportunity to decide what their respective towns and schools will spend over the upcoming fiscal year.

In these hard economic times many towns are holding the line on spending, practicing austerity in order to lessen the tax burden on taxpayers, knowing many of them are having a tough time making ends meet.

While New Hampshire hasn't seen nearly as much economic disruption as other parts of the country, we're still seeing some. The only saving grace has been the fall of gas and heating fuel prices well below the prices paid last year. But still people are struggling.

One of the biggest issues in our small town is whether or not to spend the money necessary to renovate and expand our police station. While it is tempting to put it off another year or two, the department has been suffering with cramped quarters and insufficient storage space for over ten years now, and it's only going to get worse.

Does it make sense to commit to that kind of spending given the economic conditions? On the plus side is the lower cost of materials, lower construction costs (contractors are hurting for work with the collapse of the real estate market), and bond interest rates being quite low. The cost of the project may never be lower. On the negative side is the addition to the property tax rate to pay for the project. If the economy gets substantially worse it could hurt the taxpayers. (At least the town won't see the additional taxes to pay the bond until the fiscal year following this upcoming one.)

Our town is not the only one facing this dilemma. Plenty of others have to make similar decisions, putting off much needed work to roads and municipal buildings, cutting services and jobs in order to keep spending increases as low as possible, assuming they don't decrease it below their present budget.

All of this will be hotly debated at town and school meetings, with some going along with the austere budget proposals in order to keep spending in check and others fighting against budget cuts (or level spending) because they believe it will hurt their towns.

Part of the problem with some in the second group is they have a difficult time telling the difference between nice-to-haves and need-to-haves. When times get tough they have real problems cutting back or eliminating the nice-to-haves. It can make for heated discussions, side debates, and on occasion, hurt feelings. But in the end, the voters will decide what will be spent, what won't, and that will be that.

That's just the way it should be.