Concerned Legislators Form Coalition of Legislators Against Downshifting (CLAD)

The information contained in this article is not intended as legal advice and may no longer be accurate due to changes in the law. Consult NHMA's legal services or your municipal attorney.

Please Encourage Your Legislator(s) to Join this Bi-Partisan Legislative Coalition

During the 2015 legislative session, several House members formed a new bi-partisan group called the Coalition of Legislators Against Downshifting (CLAD), led by Rep. Mario Ratzki. CLAD met several times during the past legislative session, and last April, NHMA’s Judy Silva and Barbara Reid presented an overview of anticipated budget cuts and a list of estimated reductions in state aid by municipality to over 40 legislators crowded into a legislative committee room.

Initially state budget writers justified this so-called “downshifting” as a temporary response to the economic recession. However, downshifting now appears to be legislative business as usual, causing delays in everything from road and bridge repairs to water- and waste water-plant upgrades to new school building construction.

CLAD is planning to meet again starting in January, 2016. Since downshifting affects local property taxpayers in every municipality, it is surprising that more legislators are not members of this coalition. NHMA asks our members to encourage your legislative representative(s) to join this bi-partisan coalition. Downshifting to municipalities, improving local economies, and educating legislators and the public about the impact of state-level decisions on local property taxes are all issues that should be of concern to every legislator. With our member’s urging, the next meeting of CLAD could (and should) be standing-room only!

Shifting the Conversation: Why I formed CLAD

By Rep. Mario Ratzki

In simple terms, “downshifting” means the shifting of costs from the state to the municipalities. The most outrageous example of downshifting is the State’s ending its 35% revenue sharing with the towns to pay for municipal employees’ retirement costs. Because of downshifting, municipalities have increased property taxes about 50% since 2002 to make up the difference. When you increase property taxes by 50% in 13 years, you penalize the most vulnerable of our citizens: the elderly on a fixed income or the young family who cannot afford to buy a house because of high property taxes. And when revenues turn out to be better than expected, shouldn’t we try to start restoring revenue sharing? This is not to blame anyone; budgetary constraints lead to difficult decisions, but still: towns and cities always seem to get the short end of the stick.

There have been victories. Although our 18 flood control towns received only 30% of flood control payments in 2012 and 2013, in 2014 and 2015, we were able to get 2012 paid in full and partial payments for 2013 based on a settlement from Massachusetts of approximately $2 million. Moving forward the towns will get 100% payments: a satisfactory outcome thanks to Hopkinton Selectman Jim O’Brien and others, who have fought this battle over the past several years.

To support this fight, I formed the Coalition of Legislators Against Downshifting (CLAD). The idea was simple: Keep the issue of downshifting in the forefront of legislators. At our first meeting, we had 6 Democrats and 3 Republicans. At our second meeting, a bi-partisan group of more than 40 state representatives attended a presentation by NHMA staff. Our third meeting we had Mayor Ken Merrifield of Franklin give a presentation to us. Our fellow legislator, Representative Tom Buco, also talked to us about the lack of funding for municipal water and wastewater infrastructure projects.

In 2016, CLAD intends to invite another city mayor and a county commissioner to discuss specific bills that would affect local property taxpayers. We hope to explore new revenue sources, such as a State Bank and the creation of a State Grant Office which would consolidate grant writing in one office and aggressively apply for federal monies. The State of Nevada did just that and in less than a year and a half garnered an EXTRA $100 million from the federal government.

At CLAD, we will also make every effort to engage more Republican representatives. We are not a partisan group. We will keep the issue of downshifting front and center as well as other issues facing our cities and towns, such as broadband expansion in our rural areas. CLAD is here to stay and we welcome all.

Development of State Bank May Help Reduce Property Taxes

By Rep. Valerie Fraser

New Hampshire is not broke! It’s just that our money is not being managed in a prudent way to benefit the public, but to benefit the private banking industry. Therefore, one way to control “downshifting” is to restore credit to the economy of New Hampshire. Last year, the state spent $77 million in interest paid to the private parties that we borrow from. Imagine how much better off we could be if the state had kept that money and reinvested it here at home. One way to keep that money from leaving the state, and consequently preventing downshifting, is to create our own lending institution, a public bank. Nationally, the combined 50 states give around one trillion dollars annually in interest to Wall Street.

Although federal grant money is also an option, there are often mandates attached, or solutions suggested like cutting spending, raising taxes, or worse, selling off public assets. The real problem is lack of credit. A public bank would provide far more benefits, such as the following: it would not compete with local state chartered community banks/credit unions for loans or commercial retail services/deposits; it could generate new non-tax revenues; lower debt costs for local governments; build up small businesses; remain independent of private banking interests; reduce property taxes and provide accountability, transparency and fiscal responsibility. For more information about a state public bank go to www.bankingonnewhampshire.org.

Local Water and Wastewater Infrastructure Takes Hit from State’s Downshifting

By Rep. Tom Buco

The state of New Hampshire has two state aid programs intended to assist municipalities in funding water and wastewater infrastructure projects; RSA 486, aid to municipalities for water pollution control and RSA 486-A, aid to public water systems. These two programs commit 20%-30% grants toward the amortization of construction costs to build water and wastewater infrastructure projects.

By Executive Order 2008-10 on November 21, 2008, $3.3 million was cut from these state aid programs. The stated intent of this order was that these grants would be deferred until the next biennium. In fact no payments were made for three biennium! This action created the “Delayed and Deferred” list of infrastructure projects for which municipalities had issued bonds and incurred significant debt. After municipal taxpayers had made decisions based on existing state law, the state reneged on its commitment and left the local taxpayers holding an empty bag.

In the 2013 session of the NH General Court, the House, the Senate and the Governor agreed that municipalities had taken action based on the state’s commitment and had suffered financial damage when the state reneged. Therefore, in the FY 2014-2015 state budget, the “Delayed and Deferred” list was fully funded. However, as part of the FY 2014-2015 budget, House Bill 2 also instituted a moratorium on these state aid grants which will now downshift the total cost of these expensive water and wastewater projects onto local cities and towns.

The Historical Downshifting of School Building Aid

By Rep. Michael Cahill

Beginning in the 1950’s, New Hampshire partnered with local municipalities providing a portion of the cost to build or renovate schools. Eight years ago, however, the Legislature placed a moratorium on School Building Aid and that moratorium remains in effect today. This means that the state has down shifted the entire costs of School Building Aid to local property taxpayers.

In an effort to encourage consolidation, regional schools built for students from multiple cities and towns were incentivized. In the case of very small towns, this strategy makes sense. However, some of these cooperative districts built high schools for 2,000 students with many amenities added due in part to the state’s share of as much as 60%. Increasing construction costs led to the decision to bond the shortfall in the state’s portion. Under the moratorium, the state appropriates only funds for principal and interest on previous school projects. In 2040, the bonds will be paid off; meanwhile our schools deteriorate and the cost to build or renovate increases. The state has an obligation to educate our children and if we are to reverse the outbound flow of young people out of our state, we must address the priorities of young families, which include good schools. These families are not only community members, consumers, workers and employers but are a source of subsequent generations we hope will make their homes in New Hampshire.