The Real Cause of Exploding Taxes

Guest contribution by Arthur Green

Some on social media are searching for reasons apart from the obvious for the explosive tax increase which the residents of the district face this year. One possible cause suggested recently is that towns “pay” for students based on 2-year old ADM (Average Daily Membership enrollment) whereas state aid only “pays back” the towns based on 1-year old ADM (reflecting fewer students due to declining enrollment).

Let’s take a fact check on this.

The tax apportionment to each town was provided by the district at deliberative on this handout.  The total apportionment is $50,502,000 (proposed budget excluding warrant articles).  That is the sum of the line “2 Operating Budget” for each town.  This is what needs to be collected from the property taxpayers (after deducting revenues and state aid from the total operating budget).

The corresponding amount last year was $46,674,107.

So the district is calling on the property tax base for $3.8 million more this year versus last year.

But the budget is up only $1 million.  How can the tax impact be almost 4 times as much as the budget increase?

  1. Top factor is that in the 2014/15 year we had a $3.5 million surplus offsetting the tax bill last November (2015/16 year).  But for this year, the budgeted surplus is $1,650,000; this means a revenue reduction of $1.850,000 for 2016/17.
  2. Revenue line “1990 Other Local Revenue” is $817,550 in the current 15/16 year, dropping to $350,407 in the budget year – a $467,000 reduction.  This is because the district no longer expects windfall rebates from the LGC HealthTrust.
  3. State Adequacy Aid (line “3111 Education Grant”) will decrease by $420,000.  Two factors are driving this.  First, the state provides adequacy aid based on enrollment, and enrollment is falling.  This causes about $320,000 of the reduction.  Second, Sandown and Danville receive substantial “Stabilization” grants which are being phased out over 25 years – causing about $100,000 of the reduction.

So to summarize:

  • $1,000,000 budget increase
  • $1,850,000 reduction in planned surplus
  • $467,000 elimination of windfall LGC HealthTrust rebate
  • $420,000 reduction in state aid
  • …  adds up to the $3.8 million tax increase.

What about the towns getting charged for students based on (higher) 2-year old enrollments?

This has nothing to do with how much money the district demands from the taxpayers – it only affects the allocation amongst the towns.  Let’s see the impact, using 2014/15 figures which are in the 2015 annual report (pages 39-14):

Apportionment impact

The tax allocation for the 2015/16 year was done using 2014 ADM – as per the 2015 Annual Report.  If the allocation had used the 2015 ADM, Atkinson and Sandown would have paid more, Danville and Plaistow would have paid less.

But the total amount paid by the district taxpayers would have been identical.  For example, Danville faces an increase of 7.2%, or $567,000.  So a swing on the scale of $271,000 would definitely be important to the town.  But any relief for Danville would necessarily be at the expense of the other 3 towns. Please note that this analysis applies to last year, when taxes were more or less flat or decreased due to the large surplus.  The numbers which would apply to the new budget year will likely be different, with different “winners” and “losers” – but the necessary ADM figures will not be available until September.

What we can see from the tax impacts provided at deliberative is that there will be large tax increases in all four towns.  These increases are caused by the district spending more to educate fewer students.  Fair sharing of the impact among the four towns is important, but has nothing to do with causing the tax increase.

[Edited by DG]




Filed under Sandown Issues

6 responses to “The Real Cause of Exploding Taxes

  1. Jeanmarie

    I believe it was my post that you are referring to thus I would like to explain what I was investigating. Back in the December time frame, many Danville residents were wondering why their tax rate did not decrease while the other towns did get a decrease and in fact had an increase in tax rate, yet they had a substantial drop in enrollment as well. Once the Annual Report was published, I was able to compare the apportion amount from the previous year and what stuck out the most was the difference in Aid given the drop in enrollment. Danville’s Operating expenses was DOWN $175,794 and their aid was down by $151,556 from the previous year, yet Sandown’s operating portion was down $309,919 but the aid was only down $5,677. When I dug further and looked at the ADM-R differences, town of Danville got charged for more kids than they got aid for. I ran a hypothetical model using the 2015-2016 budget using the same year ADM-R (14-15) as aid and Danville would have had a tax rate of .81 lower than they did get…but yes of course since we are in this together, another town’s tax rate would go up. Changing which ADM-R we use for apportioning does not solve long term tax rate issues in any way, however it would align the ADM-R used for apportioning better with how many kids you are getting aid for. Not saying it should be done or not, but it does help shed some light on what happened to Danville’s tax rate compared to the other towns.

    • Thank you for this comment and your hard work in trying to figure out what is going on.

    • Mark Acciard

      While this article analysis is brilliant, accurate, and insightful, it appears to be a case o seeing the trees while losing sight of the forest.

      The central question should be why TRSD’s annual budget and expenditures keep increasing while enrollment shows a fairly dramatic decline.

      When asked in the past Mr. Metzler gives the facile answer that the kids lost were not all in one school or classroom, meaning that you can not simply cut that classroom, teachers, and expenses. While this is true, it is also intentionally misleading, as is so much that spews forth from the Super’s office.

      The fact is that district enrollment has fallen from 4,625 in the 2007-2008 school year to 3,653 in the 2015-2016 school year. This decline of almost 1,000 students or 22% has occurred while total expenditures has increased from $54,915,063 to $60,909,933 in the 2013-2014 school year(the last for which the DOE has data), an 11% increase.

      THIS is the reason that the districts war on legal disclosure of public information is so heinous, and indefensible.

  2. Can you tell me why the district offers Night high school? The classes, to me, don’t look like they are part of a GED program. A GED program might be eligible for grants which would put it in Fund 2 not 1. Also, Adult Ed classes are in the Fund 1 budget under the same classification as Night classes. This is all to the tune of $200,000. I know the adult Ed should be offset in revenue sonewhere. Is it deducted before tuition is calculated and the number of students does not include these for ADM purposes correct?

    • I don’t know the answer to any of those questions, but will try to get you answers as they are very good points.

    • Jeanmarie

      The annual report shows tuition as revenue and is subtracted out before apportioning the budget. The ADM that is used for apportioning is the ADM-R which is Average Daily Membership in Residence and includes PreK through grade 12 according to the report on the DOE website.

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