Showing posts with label Revenue Sharing. Show all posts
Showing posts with label Revenue Sharing. Show all posts
Friday, November 13, 2009
The Cost of Downshifting to Granite State Taxpayers
Tom DeRosa asked me to stop by for the NH GOP's weekly podcast. We discussed the cost of downshifting, from the Congress to state budgets, and from the state to local taxpayers.
Wednesday, November 11, 2009
Arlinghaus on your TV
Well, if you live in the Manchester area anyway. Charlie Arlinghaus will be talking about the Verizon Wireless Arena bonds and municipal retirement stories this evening on "Two Live Joes" on MCAM, Channel 23 from 8:00 to 8:30.
Charles M. Arlinghaus: City's revenue sharing loss was inevitable
By CHARLES M. ARLINGHAUS
The state's decision to freeze revenue sharing payments was not a criminal act. It doesn't constitute fraud. It isn't unconstitutional. It shouldn't send your town into turmoil, and it's not even a bad idea. It may have a negative impact on the Verizon Wireless Arena, but every change in state law shouldn't lead to a lawsuit.
Manchester's bond payments on the arena are guaranteed by the city's portion of the state meals and rooms tax revenue. Neither the state nor the city is on the hook for anything other than the city's share of that payment, about $4.6 million last year.
It is a risky setup for bondholders because the state meals and rooms payments are not guaranteed and have gone up and down in their short history.
The meals and rooms tax was passed in 1967 to provide additional revenue for the state, but also for the towns. The state tinkered with the share going to towns and eventually took it all. Starting in 1995, state lawmakers decided to bring back some degree of revenue sharing.
They created a formula that started small, but dedicated most of the annual rise in revenue toward increasing the share sent to the towns. In theory, the town share of the total revenue would increase until municipalities were finally receiving 40 percent of the total. Right now, they are up to about 25 percent.
In the last budget, the governor originally proposed suspending revenue sharing entirely for two years. In the end, the Legislature proposed freezing it at 2009 levels for two years.
The state canceled the other major municipal revenue sharing program anyway, and lawmakers were convinced they couldn't cut too much more without burdening towns. Manchester Mayor Frank Guinta at the time fought to restore some of the funding for fear of defaulting on the arena's bond payments.
Any revenue sharing program goes up and goes down. This program has a history over 42 years of rising, sometimes declining, sometimes disappearing entirely. Strangely, bondholders were willing to invest in a proposition secured by such an unreliable source.
If the state behaved as it had in the past, payments would go down. If it behaved as most states do in difficult economic times, payments would go down. If the state ever passed a tax cut (less likely), payments would go down.
The city's bond counsel warned the state that changes to state law might cause a lawsuit. He cited a Washington case to suggest the state can't repeal a tax the city used to pay bonds. But while a state might be obligated if it used a tax to secure a bond, it is just not reasonable to think that state action can be vetoed because of what one city decided to do with its aid payment.
Just as important, there's no reason for anyone to be surprised by this action. The governor's spokesman told the Josiah Bartlett Center when we broke the story on Monday that "Moody's raised this as a risky funding scheme when this was put together, pointing out that meals and rooms revenues are not guaranteed to be constant." There's some fear that bondholders might sue, but they knew the risks at the time and don't have much cause for surprise.
The bond counsel's proposed solution is even sillier than a lawsuit. He suggests that the old version of the law be grandfathered for any city that used the payment to secure bonds. In other words, Manchester would be rewarded for taking a risky decision, while the rest of the state would operate under a different law. Payments to your town would be frozen, but not payments to Manchester.
To be fair, paying for the arena is going to be difficult for Manchester, but every city and town in the state faced similar struggles and similar budget uncertainty. Many towns noticed the financial difficulties the state was having. I think I even wrote about it once or twice.
My own town of Canterbury is a good example of the common sense of citizen selectmen. Canterbury is not particularly frugal, just average. Our taxes have gone up by an average 5 percent each year for the last 15 years. But selectmen knew that state aid was going to be cut, so they didn't count on getting it. Instead, they cut the town budget by 6 percent, and the school budget declined as well. The end result was that our property taxes went down by 8 percent, which was needed relief to people fighting a recession.
The recession has been tough on every budget. It was expected that the state would freeze aid. The right approach is the one fiscally responsible towns have taken. Long-term obligations put pressure on the rest of your budget, but it doesn't have to stop you from cutting taxes even when state aid is frozen.
Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.
The state's decision to freeze revenue sharing payments was not a criminal act. It doesn't constitute fraud. It isn't unconstitutional. It shouldn't send your town into turmoil, and it's not even a bad idea. It may have a negative impact on the Verizon Wireless Arena, but every change in state law shouldn't lead to a lawsuit.
Manchester's bond payments on the arena are guaranteed by the city's portion of the state meals and rooms tax revenue. Neither the state nor the city is on the hook for anything other than the city's share of that payment, about $4.6 million last year.
It is a risky setup for bondholders because the state meals and rooms payments are not guaranteed and have gone up and down in their short history.
The meals and rooms tax was passed in 1967 to provide additional revenue for the state, but also for the towns. The state tinkered with the share going to towns and eventually took it all. Starting in 1995, state lawmakers decided to bring back some degree of revenue sharing.
They created a formula that started small, but dedicated most of the annual rise in revenue toward increasing the share sent to the towns. In theory, the town share of the total revenue would increase until municipalities were finally receiving 40 percent of the total. Right now, they are up to about 25 percent.
In the last budget, the governor originally proposed suspending revenue sharing entirely for two years. In the end, the Legislature proposed freezing it at 2009 levels for two years.
The state canceled the other major municipal revenue sharing program anyway, and lawmakers were convinced they couldn't cut too much more without burdening towns. Manchester Mayor Frank Guinta at the time fought to restore some of the funding for fear of defaulting on the arena's bond payments.
Any revenue sharing program goes up and goes down. This program has a history over 42 years of rising, sometimes declining, sometimes disappearing entirely. Strangely, bondholders were willing to invest in a proposition secured by such an unreliable source.
If the state behaved as it had in the past, payments would go down. If it behaved as most states do in difficult economic times, payments would go down. If the state ever passed a tax cut (less likely), payments would go down.
The city's bond counsel warned the state that changes to state law might cause a lawsuit. He cited a Washington case to suggest the state can't repeal a tax the city used to pay bonds. But while a state might be obligated if it used a tax to secure a bond, it is just not reasonable to think that state action can be vetoed because of what one city decided to do with its aid payment.
Just as important, there's no reason for anyone to be surprised by this action. The governor's spokesman told the Josiah Bartlett Center when we broke the story on Monday that "Moody's raised this as a risky funding scheme when this was put together, pointing out that meals and rooms revenues are not guaranteed to be constant." There's some fear that bondholders might sue, but they knew the risks at the time and don't have much cause for surprise.
The bond counsel's proposed solution is even sillier than a lawsuit. He suggests that the old version of the law be grandfathered for any city that used the payment to secure bonds. In other words, Manchester would be rewarded for taking a risky decision, while the rest of the state would operate under a different law. Payments to your town would be frozen, but not payments to Manchester.
To be fair, paying for the arena is going to be difficult for Manchester, but every city and town in the state faced similar struggles and similar budget uncertainty. Many towns noticed the financial difficulties the state was having. I think I even wrote about it once or twice.
My own town of Canterbury is a good example of the common sense of citizen selectmen. Canterbury is not particularly frugal, just average. Our taxes have gone up by an average 5 percent each year for the last 15 years. But selectmen knew that state aid was going to be cut, so they didn't count on getting it. Instead, they cut the town budget by 6 percent, and the school budget declined as well. The end result was that our property taxes went down by 8 percent, which was needed relief to people fighting a recession.
The recession has been tough on every budget. It was expected that the state would freeze aid. The right approach is the one fiscally responsible towns have taken. Long-term obligations put pressure on the rest of your budget, but it doesn't have to stop you from cutting taxes even when state aid is frozen.
Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.
Tuesday, November 10, 2009
Watchdog on the Radio- Tuesday Morning Edition
Grant Bosse will join WGIR's Charlie Sherman at 7:37am to discuss his exclusive story on the threat of default on the bonds for the Verizon Wireless Arena.
Mayor-elect Gatsas reacts to possible bond default
(MANCHESTER) Mayor-elect Ted Gatsas says Manchester taxpayers and budget writers won't be on the hook if the bonds on the Verizon Wireless Arena default. The current State Senator and Alderman, and incoming Mayor reacted to the Josiah Bartlett Center 's report that changes in the state budget could prevent the Manchester Housing and Redevelopment Authority from making its bond payments in 2010.
In 2000, the city funded construction of the Civic Center, since renamed the Verizon Wireless Arena, through non-recourse bonds funded through the city's share of Meals and Rooms Tax Revenues. This year's budget capped those revenues for two years. Last week, Moody's Investor Services downgraded the bonds to "junk bond" status, and warned of a possible default next year. But Gatsas is confident that any problems with the arena won't spill over into the city budget.
"These bonds don't affect city's bond capacity or bond rating," Gatsas says.
Gatsas opposed the state budget when the Senate approved HB 2 in June. He spoke out at the time against cutting state revenue sharing to balance the $11.5 billion spending plan.
"The downshifting is something I had a concern with, as does every community in the state," Gatsas added. "With the JUA in question, what would be the next position that the state may take?"
The budget anticipates restoring the old revenue sharing formula in 2012, and Gatsas hopes the temporary suspension will go away as the economy recovers.
"Everyone hopes the economy is going to recover by then," Gatsas explained. "I would share the hope that the economy would change."
In 2000, the city funded construction of the Civic Center, since renamed the Verizon Wireless Arena, through non-recourse bonds funded through the city's share of Meals and Rooms Tax Revenues. This year's budget capped those revenues for two years. Last week, Moody's Investor Services downgraded the bonds to "junk bond" status, and warned of a possible default next year. But Gatsas is confident that any problems with the arena won't spill over into the city budget.
"These bonds don't affect city's bond capacity or bond rating," Gatsas says.
Gatsas opposed the state budget when the Senate approved HB 2 in June. He spoke out at the time against cutting state revenue sharing to balance the $11.5 billion spending plan.
"The downshifting is something I had a concern with, as does every community in the state," Gatsas added. "With the JUA in question, what would be the next position that the state may take?"
The budget anticipates restoring the old revenue sharing formula in 2012, and Gatsas hopes the temporary suspension will go away as the economy recovers.
"Everyone hopes the economy is going to recover by then," Gatsas explained. "I would share the hope that the economy would change."
Monday, November 9, 2009
State Revenue Sharing Decision could Endanger Manchester Arena
The state’s decision to freeze revenue sharing under the Meals and Rooms Tax could endanger the financing for the Verizon Wireless Arena in Manchester. Last week, Moody’s Investors Services downgraded the bonds used to fund the arena, held by the Manchester Housing and Redevelopment Authority, from Baaa3 to Ba2. The lower rating puts the bonds in “non-investment grade” or “junk bond” status, meaning they have only moderate security of future repayment. Manchester Mayor Frank Guinta notified Governor John Lynch of the decision in a letter on Friday.
Read the full story below:
State Revenue Sharing Decision could Endanger Manchester Arena
Read the full story below:
State Revenue Sharing Decision could Endanger Manchester Arena
Mayor Guinta letter to Governor Lynch
Manchester Mayor Frank Guinta's letter to Governor John Lynch concerning the possible default of bonds on the Verizon Wireless Arena.
Guinta Letter 11-06-09
Guinta Letter 11-06-09
Email from Moody’s Investor Services to William Sanders
Notice from Moody's Investor Services on downgrading the bonds against the Verizon Wireless Arena held by the Manchester Housing and Redevelopment Authority.
Moody's Notice to downgrade bonds on Verizon Wireless Arena
Moody's Notice to downgrade bonds on Verizon Wireless Arena
Letter from Robert Beinfield to Walter St. Onge
Manchester Bond Counsel Robert Beinfield's letter outlining the city's concerns with Governor John Lynch's proposal to suspend revenue sharing under the Meals and Rooms Tax.
Beinfield Letter to Walter St. Onge
Beinfield Letter to Walter St. Onge
Tuesday, June 9, 2009
Telegraph- Building Aid will survive in NH Budget
Kevin Landrigan reports in the Nashus Telegraph that yesterday's opening of the House-Senate Committee of Conference came to one significant agreement; restoring school building aid to the state budget:
The only significant concession came when House budget writers agreed to find enough revenue to pay $87 million in school building aid grants.
The $11.5 billion budget (HB 1) the House approved in March did not include building aid for school districts.
The Senate added the money at the 11th hour of its work on the spending plan after they had approved opening up three video slot machine parlors at the racetracks and authorizing two more at North Country resort sites.
We've covered what suspending building aid would do to local school districts. Neither the House nor Senate budgets include funding under the state's 31-A revenue sharing program, which would increase local property taxes.
Thursday, June 4, 2009
School Building Aid Back in Budget
Before yesterday debate on the state budget, Adam Krauss of Foster's Daily Democrat took a look at the Senate Finance Committee's decision to restore more than $80 million in school building aid cut by the House:
The Senate budget still cuts municipal revenue sharing under Chapter 31-A, but does not suspend Rooms and Meals revenue sharing as originally proposed by Governor John Lynch.
The House's budget proposal didn't include the aid after the chamber's Public Works Committee cut it from the capital budget over disagreements with Gov. John Lynch's plan to fund it with bonds.
The Senate version pays for the aid through the operating budget and increases the proposal that was before the House by $4 million.
"We did it because we have affection for the local taxpayers," committee chairman Sen. Lou D'Allesandro, D-Manchester, said of the increased amount.
Without the funds, local property taxpayers would have to pay more to ensure districts pay off construction and building bonds that were already taken out, which the aid supports, he said.
The Senate budget still cuts municipal revenue sharing under Chapter 31-A, but does not suspend Rooms and Meals revenue sharing as originally proposed by Governor John Lynch.
Wednesday, May 13, 2009
Josiah Bartlett Center Studies Local Impact of State Budget
Josiah Bartlett Center for Public Policy
For Immediate Release
May 13, 2009
For more information: Grant Bosse (603) 748-3659
For Immediate Release
May 13, 2009
For more information: Grant Bosse (603) 748-3659
READ THE FULL REPORT
Josiah Bartlett Center Studies Local Impact of State Budget
Charts revenue lost in every town and school district in New Hampshire
(CONCORD) The Josiah Bartlett Center for Public Policy today released its study of the local impact of the state budget, as approved by the New Hampshire House. The House Budget suspends the 40-year old Revenue Sharing Program under Chapter 31-A, and provides no funds for State Building Aid. Based on 2008 revenues to each town and the amount scheduled to be awarded to each school district, the Josiah Bartlett Center is able to provide local budget writers with the projected impact of the pending state budget.
"Budgets are about choices, and as the State Senate takes up this budget, it should know the impact it would have on cities and towns," said Lead Investigator Grant Bosse, who authored the study. "Better information leads to better decisions, and we're happy to provide it."
The state Department of Education has identified $45 million in projects eligible for reimbursement in 2009-2010. Based on the $41.65 million recommended by Governor John Lynch, the Josiah Bartlett Center calculated how much each district would have received. Revenue Sharing projections were based on actual 2008 revenues received by each town, calculated by the New Hampshire Municipal Association. The State Senate may consider restoring either or both of these local revenue streams as it debates HB 1.
"The budget as it stands down shifts the state's fiscal problems onto towns and school districts that can't afford it," Bosse added. "The Josiah Bartlett Center recommends that lawmakers try harder to control state spending before passing on their budget problems to local taxpayers."
To download the report, go to jbartlett.org.
Josiah Bartlett Center Studies Local Impact of State Budget
Charts revenue lost in every town and school district in New Hampshire
(CONCORD) The Josiah Bartlett Center for Public Policy today released its study of the local impact of the state budget, as approved by the New Hampshire House. The House Budget suspends the 40-year old Revenue Sharing Program under Chapter 31-A, and provides no funds for State Building Aid. Based on 2008 revenues to each town and the amount scheduled to be awarded to each school district, the Josiah Bartlett Center is able to provide local budget writers with the projected impact of the pending state budget.
"Budgets are about choices, and as the State Senate takes up this budget, it should know the impact it would have on cities and towns," said Lead Investigator Grant Bosse, who authored the study. "Better information leads to better decisions, and we're happy to provide it."
The state Department of Education has identified $45 million in projects eligible for reimbursement in 2009-2010. Based on the $41.65 million recommended by Governor John Lynch, the Josiah Bartlett Center calculated how much each district would have received. Revenue Sharing projections were based on actual 2008 revenues received by each town, calculated by the New Hampshire Municipal Association. The State Senate may consider restoring either or both of these local revenue streams as it debates HB 1.
"The budget as it stands down shifts the state's fiscal problems onto towns and school districts that can't afford it," Bosse added. "The Josiah Bartlett Center recommends that lawmakers try harder to control state spending before passing on their budget problems to local taxpayers."
To download the report, go to jbartlett.org.
Sunday, April 5, 2009
State budget plan burdens city, town taxpayers
The Portsmouth Hereld editorializes against cost-shifting in the state budget, as Governor Lynch's plan scoops up federal stimulus money slated for cities and towns:
We are rapidly learning as Lynch's budget makes its way through the Legislature that much of the federal money will be filtered through state agencies, and those agencies will be taking the majority of the funding for state projects, such as the repaving of a portion of Route 101, and precious little will be left for the cities and towns.The Herald concludes that Lynch is attempting to balance the state budget on the backs of local taxpayers:
Add to that cuts to the rooms and meals taxes returned to municipalities, the complete elimination of revenue sharing and an decrease in the percentage the state pays into the retirement system, and town officials are becoming more and more anxious about what all this will do to the tax rates they worked so hard to keep low this year.
That the state has financial problems we have no doubt, but the governor should not attempt to rectify that situation by further burdening New Hampshire citizens already struggling to make ends meet.
Wednesday, March 11, 2009
Bartlett Center reports property tax impact of ending revenue sharing
Bartlett Center reports property tax impact of ending revenue sharing
Berlin Facing Highest Property Tax Hike in NH
(Concord) The Josiah Bartlett Center for Public Policy today released
a report outlining how a legislative proposal to end revenue sharing
would impact local property tax rates. Berlin taxpayers would face an
increase of $3.16 per thousand in their tax rate unless state revenues
were replaced by other sources. A dozen New Hampshire communities
would face increases of over a $1.00 per thousand.
Read the Full Report
COMPLETE TOWN BY TOWN LIST
"For forty years, New Hampshire communities have relied on their share
of the Business Profits Tax and Rooms and Meals Tax to fund local
government," said the report's author, Grant Bosse. "Ending revenue
sharing would force local taxpayers to foot the bill for fixing the
state's out-of-control budget."
The Bartlett Center relied on revenue data from the New Hampshire
Municipal Association and local property values from the state
Department of Revenue Administration in calculating the local tax
impact across New Hampshire. Governor John Lynch proposed suspending
the state's two largest revenue sharing formulas in his February
Budget Address, cutting $160 million that would otherwise go to cities
and towns. Lynch has since backed away from suspending one revenue
stream, while continue to support suspending the other. Both sources
of local revenue would be suspending under House Bill 2, know pending
before the House Finance Committee.
"New Hampshire towns voted on their annual budgets last night, but
their tax rate might go even higher if the Legislature ends revenue
sharing," Bosse added. "Lawmakers would be forcing local taxpayers to
bear the burden of their budget problem."
The Josiah Bartlett Center for Public Policy is a free market think
tank based in Concord, New Hampshire. For more information go to
http://www.jbartlett.org/.
-30-
Berlin Facing Highest Property Tax Hike in NH
(Concord) The Josiah Bartlett Center for Public Policy today released
a report outlining how a legislative proposal to end revenue sharing
would impact local property tax rates. Berlin taxpayers would face an
increase of $3.16 per thousand in their tax rate unless state revenues
were replaced by other sources. A dozen New Hampshire communities
would face increases of over a $1.00 per thousand.
Read the Full Report
COMPLETE TOWN BY TOWN LIST
"For forty years, New Hampshire communities have relied on their share
of the Business Profits Tax and Rooms and Meals Tax to fund local
government," said the report's author, Grant Bosse. "Ending revenue
sharing would force local taxpayers to foot the bill for fixing the
state's out-of-control budget."
The Bartlett Center relied on revenue data from the New Hampshire
Municipal Association and local property values from the state
Department of Revenue Administration in calculating the local tax
impact across New Hampshire. Governor John Lynch proposed suspending
the state's two largest revenue sharing formulas in his February
Budget Address, cutting $160 million that would otherwise go to cities
and towns. Lynch has since backed away from suspending one revenue
stream, while continue to support suspending the other. Both sources
of local revenue would be suspending under House Bill 2, know pending
before the House Finance Committee.
"New Hampshire towns voted on their annual budgets last night, but
their tax rate might go even higher if the Legislature ends revenue
sharing," Bosse added. "Lawmakers would be forcing local taxpayers to
bear the burden of their budget problem."
The Josiah Bartlett Center for Public Policy is a free market think
tank based in Concord, New Hampshire. For more information go to
http://www.jbartlett.org/.
-30-
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