In a tight economy, some area towns have been left struggling with their budgets, dealing with rising costs, dropping property values and unanticipated revenues.
Seacoast towns, including Exeter, Stratham and North Hampton, recently mailed their December tax bills, but while they wait for the revenue to come in, some towns are seeing a backlog in unanticipated revenues.
To pay for the town’s portion of the school and county taxes, Exeter is seeking $4.5 million in tax anticipation notes. North Hampton is facing a similar situation, requesting up to $1 million in tax anticipation notes.
Exeter Town Manager Russell Dean said the tax anticipation notes are necessary due to cash flow.
“Cash flow is a function of when we send bills out and when we get revenues in,” he said. “There are two times a year when we are able to bring in revenues in the volume we need to support all services. When the bills are out late, it means we have less cash on hand.”
Town revenues in Exeter have suffered this year, with $351,096, as of Nov. 30, due in property taxes. Also, property values have declined, and there has been a drop in revenue of building permits and investment income.
Unpaid property taxes negatively impact the town’s cash flow, Dean said.
“It’s cash that we don’t anticipate collecting, so it can cause adverse effects to the budget in ways other than collected taxes. If we collect less than we levy, it impacts our bottom line, because schools and county are mandatory payments we have to make.”
Stratham experienced a $2.86 hike in the tax rate this year due to shortfalls in revenue at the state and local level. In a meeting with the Board of Selectmen, Town Administrator Paul Deschaine said appropriations were down this year, but that revenues were down by an even larger margin.
The town spent about $1.6 million less than it usually does, but it also raised about $1.9 million less. In addition, the town’s general fund is down by about $300,000, which needs to be raised through taxes.
Deschaine said towns can deal with revenues coming in lower than projected through the short-term borrowing of tax anticipation notes.
“Alternately, if you know in advance enough you create or increase your overlay line item, when you are setting a tax rate, which effectively creates additional burden on other taxpayers,” he said. “But those that are paying that little extra something helps with those cash flows. But you have to have foresight and foreknowledge to deal with that.”
These situations towns are facing are signs of the current economic situation.
Peter Francese, director of demographic forecasts for the New England Economic Partnership, said the economy in New Hampshire is better off than that of the rest of the country.
Francese said he measures the state’s economy based on the state coincident indexes, published by the Federal Reserve Bank of Philadelphia. The index reports the economy of New England around 199.7, which is 26 percent above the 158.9 index for the United States, including the other five New England states.
The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index.
One of the reason’s New Hampshire’s economy is better off than other’s, Francese said, is that the median sale price of residential homes on a year-to-date basis is 9½ percent below last year.
“When we’re talking about other parts of the country down 20 to 25 percent, that’s not bad,” Francese said. “There are all kinds of horror stories in the rest of the country of houses dropping as much as 50 percent in value, way into the double digits, and we are still just a shade below 10 percent and that’s pretty good.”
The housing market is down, Francese said, with the number of sales down about 16 percent on a year-to-date basis. While people are having more difficulty selling their house, the average days on the market has increased just slightly to about four months.
Bob Spoerl, designated broker with Weichert Realtors — Spoerl & Strathern, said real estate agencies have seen uptake in activity over the last six weeks.
Spoerl said this is an “absolutely fabulous” time to buy a house. “Put it this way, would you rather be buying a house now or two years ago, knowing what you know now?” he said. “I think we are getting towards the end. It could be spring, or another year, but we’re getting close to the bottom, and if rates continue to drop, it may turn out to be very busy.”
Francese said he is optimistic that New Hampshire will recover nicely when the housing market starts coming back.
“I’m looking forward to a more positive spring of 2009,” he said.
Once the economic stimulus package of President-elect Barack Obama is put into place, Francese said he sees the economy improving.
“The money itself I don’t think will be critical, but what will make a difference is people’s psychology. Right now, the average consumer in New Hampshire and elsewhere are feeling just terrible. The index of consumer confidence has never been lower, so we have to turn around people’s psychology,” he said. “It really is going to matter when consumers here in New Hampshire and on the Seacoast feel better about the economy.”