Towns Face Tax Pressures After Slow Recovery From Great Recession
DANBURY — The slow recovery of property values in the Danbury region since the Great Recession, combined with the increasing cost of municipal government, has helped push local tax rates steadily upward.
In some towns — notably Brookfield and New Fairfield — there was no recovery at all, and tax rates in those towns rose close to 50 percent from 2006 to 2016, according to state figures.
Even in Danbury, where the recovery was strongest — the city added $1 billion in taxable value over the decade — tax rates have risen some 30 percent as City Hall strove to serve a steadily growing population.
It’s important to note that the correlation between tax rates and total taxable value — the so-called “grand list” — is not direct. Many other factors intervene, including periodic property revaluations, the addition of new properties to the tax rolls, the amount of money governments are able to get from nontax sources like fees and state grants, and how determined local officials are to hold the line on spending increases.
Nor do rising tax rates automatically mean rising tax bills. If property values rise, taxes rates can be lowered to partly or wholly offset the effect on individual taxpayers’ bills.
But there can be no doubt that the gut-punch the recession delivered to regional property values has contributed significantly to rising local tax rates.
In Brookfield, for example, total taxable value in 2016 was still nearly $300 million, or 12 percent, less than in 2006, according to the state Office of Policy and Management. Over that same period, tax rates rose by 52 percent.
First Selectman Steve Dunn said is difficult to maintain adequate services, much less undertake new projects, when the grand list has lost so much value.
“Grand list growth drives your ability to do projects without taxing like crazy,” he said.
Over that same period, New Fairfield saw the net value of its taxable assets fall by $234 million, or 13 percent. Meanwhile, tax rates rose 49 percent.
Pressure on residential taxes back to top
The town relies more heavily than most on the residential portion of its tax base, which was hard-hit by the recession, said Finance Director Edward Sbordone. Luxury homes that dot the town rarely sell today near their old values, and builders are not putting up any new ones, he said.
“Years ago, we saw these mansions coming up,” Sbordone said. “Those big houses aren’t being built anymore.”
In New Milford, the tax base declined by $60 million, or 2 percent, from 2006 to 2016. Tax rates meanwhile rose 28 percent.
“I don’t think we’re in the depths of the recession, but I don’t think we are out of it,” Mayor Pete Bass said earlier this month.
Danbury-area towns aren’t the only ones struggling with this problem.
According to a recent report by the Partnership for Strong Communities, a Hartford-based nonprofit, the grand list shrank or stagnated in 152 of Connecticut’s 169 towns between 2008 and 2016.
“Home values have yet to recover from the Great Recession,” the report said.
Meanwhile, the growth of municipal spending from fiscal 2010 through fiscal 2016 outpaced inflation in about four-fifths of Connecticut towns and cities, according to a Hearst Connecticut Media analysis of OPM figures. In Bethel, Brookfield, Danbury and New Fairfield, spending growth was about twice the rate of inflation as calculated by the U.S. Bureau of Labor Statistics.
Officials said most spending increases are needed to maintain existing services, which grow more expensive over time not just because of inflation, but also because of rising labor costs and “legacy” costs such as pension obligations.
Kevin Maloney, a spokesman for the Connecticut Conference of Municipalities, said the biggest factor in municipal spending increases in most towns is in public schools.
“The cost of education is still rising and it’s difficult to restrain those costs,” Maloney said.
Nowhere is that more true than in Danbury, whose school system, owing largely to immigration, is the state’s fastest-growing, adding more than 140 new students each year.
But city Finance Director David St. Hilaire said pensions and other retirement costs are also major factors, along with a growing number of unfunded state mandates.
”All these little programs, they add up,” he said.
Over the past several years, Maloney said, many towns have been forced to cut non-education spending to buffer residents from property tax hikes.
CCM recently issued a report on municipal financing that makes nearly 40 recommendations, including diversifying revenue sources to lessen reliance on property taxes. A bill that would have required the state to assign a portion of sales tax revenue to municipalities failed in the last legislative session.
Still worse, from the municipalities’ point of view, were the drastic cuts in local aid because of the state’s ongoing budget crisis. All but a handful of Danbury-area towns lost substantial sums, first in the final state budget, then in Gov. Dannel P. Malloy’s later “holdbacks.” New Milford alone lost more than $1.7 million.
On Friday, Bass issued a statement announcing the layoffs of six employees and the elimination of 7 1/2 open or budgeted positions.
“The alternative was to present the taxpayers with a tax increase over 10 percent,” he said in a statement.