Budget Committee Chair Explains Spending Cuts

by John Heise

I felt it would be appropriate to share some insight into this year’s budget review so you may gain an understanding of what we do and how we go about our evaluation process. In addition, I would like to add some color around some of the proposed cuts this committee has recommended specifically about those involving the School Department.

This year certainly presents some challenges as we look to strategize over the recent Superior Court ruling awarding PSNH a victory with regards to their tax abatement. While it may be premature to put a nail in the proverbial coffin as the Supreme Court has agreed to hear/evaluate the case, we find it prudent as a committee to evaluate various outcomes should the tax abatement be upheld.

Here’s what we do know!
The Town of Bow has been collecting property tax revenue based on a valuation that is greater than what the Superior Court has determined.

The court has determined the following values for 2012 and 2013, $67,566,774 and $67,362,827 respectively. During that same period, the Town of Bow had valuations of $195,842,087 and $161,431,587.

If the lower court’s ruling is to be upheld this would call for a refund along with accumulated interest of approximately $8.5 million dollars. In addition, it should be noted that PSNH is also seeking an abatement for 2014 and 2015, and we fully expect 2016 to follow. Those additional years may present an additional liability of another $4 million dollars for a total of approximately $12.5 million in tax refunds and accumulated interest.

What does that mean? If these refund dollars were to be deemed due in one year i.e.; $12.5 million dollars due now, that would translate to an increase of $10.78 p/$1,000 to the tax rate. On a home valued at $300,000 that would mean an additional $3,234 due in one year in a worst case scenario. In addition, it should also be noted that many families in Bow have mortgages on their home for which many escrow their tax payments. This may place additional financial pressures on those individuals as each bank must perform an escrow analysis to adjust for any shortfall in tax collection and remittance.

Refund dollars only part of the problem! In addition to the amount potentially due as a refund, we most likely must contend with a reduced valuation in future years. If the valuation determined by the Superior Court stands and/or, if, and when, PSNH assets are sold at auction in the spring, a new value will be determined. This new value will most likely be lower than what we have currently booked for valuation and we estimate that to equate to an increase in the tax rate by approximately $.79 p/$1,000. On a home valued at $300,000 that would translate to an $237 p/yr. in additional property taxes going forward.

Certainly, the PSNH valuation issue is of paramount concern to our committee but these are not the only issues facing our community. In addition, our Elementary School needs some major repairs, projected to cost around $3 million dollars and we have underutilized properties in town like the Community Building, etc. that have drawn interest.

How does this all relate to our process? Each year the Budget Committee meets in January and February to review both the Town Budget as well as the School Budget. This is an interactive process between town and school officials. Our committee goes line by line though each department for both the proposed Town Budget as well as the School Budget, to discover potential savings. In most recent years there has been some great strategic initiatives by both the Town and School Board to reduce their budgets. These initiatives include the movement to higher deductible health plans at both the School and Town, conservative spending policies, as well as the movement of our police dispatch to the county.

Extraordinary times seek extraordinary measures! Although substantively that may be true I am not sure that tells the full story. To mitigate the effects of this litigation as well as a quest for a stable tax rate, we as a committee are looking hard at every budget item. With respect to the School Budget, last year we basically agreed to the same number but this year is a little different and for the following reasons.

First, let me say that we believe our great school system is the leading reason why people choose Bow over many other communities and is the reason my family chose Bow. There are some moving parts in this year’s budget that have raised concern for the budget committee.

The budget presented to the Budget Committee had a total appropriation of $27,366,857 for 2017-2018 School year. 2016-2017 had a total appropriation of $27,426,119, a difference of $59,262. At first glance you would say great a budget decrease! However, what is missing from the equation is the fact that the High School Bond Payment of approximately $850,000 has been eliminated, we have additional revenues from Dunbarton of $520,000, and some savings from the switch to a Higher Deductible Health Insurance Plan of $270,446, inclusive of an increase in the GMR (Guaranteed Maximum Rate) Increase of 11.5%. The above additional revenue and reduced expenditures total approximately $1,640,000.

We do concede that there are additional expenses, some unexpected such as an increase in the Retirement System of $257,992, and those expected, like 2% negotiated wage increase for BEA & BESS union contracts and non-unionized employees in the amount of $469,559.

That amount also includes newly proposed staff. In addition, with the retirement of the bond a reduction in building aid has be realized in the amount of $249,442. These items total approximately $975,000.

The above analysis is not meant to be inclusive of all budget factors but designed to highlight the major items. The difference between these two numbers total $665,000 ($1,640,000-$975,000).

Another factor we looked at was the difference between the Approved Budget and Actual Expended for the last couple of years.

2014-2015 Approved Budget $26,344,942,
Actual Expended $25,749,662, ($595,280 under), -2.31%

2015-2016 Approved Budget $27,131,986,
Actual Expended $26,483,141, ($648,844 under), -2.39%

We absolutely appreciate the prudent spending nature of the administration and we also concede that these monies do go back to the taxpayers at rate setting time in Oct. However, it also shows that by reducing the school budget we feel comfortable knowing they will still be able to deliver the high-product we have come to value.

We have provided a summary of suggested reductions in a separate attachment and support our recommendations. To highlight a few, you will notice we have kept the Full Day kindergarten program, Co-Curricular and athletic programs, the Chinese program, and agreed to some additional staffing including a new Assistant Principal at BES.

This has certainly been a challenging year and we anticipate additional challenges over the next few. I would like to thank my fellow Budget Committee members and of course our recording secretary Wendy Gilman, the Board of Selectman, the School Board, Town Administration, and the School Administration for their involvement in this process this year.

John Heise has been chair of the Budget Committee for the last four years.

It’s Cutting Time in Bow

by Chuck Douglas

The first of two power plant shoes has fallen with a $14,000,000 thud. Superior Court Judge Richard McNamara has held that Bow over assessed the plant and other Eversource properties by 58%, meaning for the tax years 2012-2015 Bow owes about $14,000,000 with interest.

Now that the goose that long laid golden eggs has become a turkey vulture there will have to be large tax increases or spending cuts to fund the check to Eversource.

While the town has appealed, the effort seems futile given that most of the judge’s decision was based on a lack of credible evidence from the town’s expert on valuation of utility properties. The Supreme Court does not make new determinations of credibility.

After hundreds of thousands of dollars in attorney’s fees and expert costs the town should take several steps now:

1. Get a new town counsel
2. Get an attorney that specializes in tax cases
3. Settle as soon as possible
4. For future years have the State value the property
5. Tell the voters how much the tax jump will be per thousand of residential tax dollars to make up for this fiasco
6. Cut the town and school budgets — not increase them!

The alternative is to borrow $14,000,000 at 4% interest for 20 years, which at 4% will cost at least $20,000,000 and will run us $1,000,000 a year to acquire nothing.

Finally, new blood will be needed on the school board and board of selectmen to retire the tax and spend crowd so long in control and who will surely resist the needed budget cuts.

School Board Should Rein In Fake News

by Chuck Douglas

School board member Jennifer Strong-Rain should stop her misrepresentation of the work the Budget Committee is trying to do for reasonable spending. On Monday January 9 she attended the budget committee meeting and showed her colors as a shill for the spenders.

She used her social media that night to say “sitting at the Bow Budget…meeting…they are talking some tough cuts (2 million dollars)!!!” She clearly misrepresented what happened. Her Facebook post at 9:17 p.m. was more than an hour after the committee had merely asked the school administration to see what a level funded budget (the same as last year’s spending) would look like. No one proposed a $2 million dollar cut that night.

Board member Strong-Rain then went off the deep end by pleading that “if you have children you MUST rally the troops.” In an update she said “It is a scary meeting!!!!”

This kind of hysteria by a public official is not going to help Bow fill the $14,000,000 hole we face. Taxpayers should retire her at the next election she faces in Bow. As a school teacher in Concord she should know better than to intentionally misinform her “troops” in Bow.

In response to the Budget Committee’s request to consider funding the schools at the same level they actually spent last year Dean Cascadden, our school superintendent, brusquely said that proposal would “impact the school program negatively,” if we funded the schools with the exact same amount they spent last year.

It is easy for Cascadden to refuse any cuts because he lives in Meredith and takes $200,000 a year in salary and benefits up 1-93 paid for primarily by Bow taxpayers.

The town budget has been cut by hundreds of thousands. Why can’t the schools pitch in for their share of shared sacrifice due to the $14 million dollar power plant hit?

Cascadden has not one single dollar at stake as a Meredith taxpayer but he gave a nose thumb to those of us in Bow who have to pick up the pieces.

We wear it – not the Man from Meredith. You the voters need to consider why Bow police, fire and emergency services can be cut but the schools are an untouchable sacred cow!
Don’t fall for it!

We who live in Bow and serve on the Budget Committeeare not the devil incarnate. We are trying to do the right thing in a very, very difficult situation.

Support us, not the Man from Meredith who has no skin in the game.

Bow Loses Power Plant Case

Reprinted from The Bow Times

Millions of tax dollars are at issue due to the recent loss of a court case involving the value of the Merrimack Station coal-fired plant in Bow. In 2012 the town set an assessed value of $159 million for all Eversource-owned property. However, in an appeal of that number to court, Judge McNamara concluded it was only worth 42% of that number or $66.6 million. The numbers for 2013 were similar.

Town counsel Paul Fitzgerald has appealed the decision, but the chances of overturning it are not great.

The statistics from utility tax appeals in the New Hampshire Supreme Court for the last 35 years reflect no reversals at all in similar cases.

Judge Richard McNamara pointed to other recent values for the coal-fired plant to help credit his conclusion that the plant itself was only worth $18,900,000. That value dispute was the major issue in the assessment of all of Eversource’s properties in Bow. He said professional valuation firm Liberty Consulting Group had a 2013 value of $15,400.000 while La Capra Associates placed a 2014 value of $10,000,000 on the plant. The judge was critical of the Bow valuation expert, George Sansoucy, for values “many orders of magnitude higher” than those of PSNH expert John Kelly.

At several points in his opinion Judge McNamara found Sansoucy not to be a credible witness. Sansoucy testified that a probable purchaser of the plant would replace it with a new coal-fired plant “despite the fact that no coal-fired plant has been built in New England is decades and natural gas has become an increasingly large share of the region’s power plant mix.” Kelly used a gas fired replacement plant reflecting the modern changes in energy markets. Fracking, said the judge, has led to dramatic production in natural gas and at lower prices than coal, so he sided with PSNH’s expert.

In another part of his opinion the judge found Sansoucy lacked credibility when he claimed coal prices could be competitive some time in the future: “It is based on pure supposition and it flies in the face of compelling evidence regarding changes in the fuel market.”

Turning to an analysis of the two jet engines (or combustion turbines) that are fired up only at extreme demand times, Sansoucy found the 50 year old engines to be good for another 25 years and therefore worth $8,000,000. Judge McNamara said, “the court cannot accept that conclusion” as to the obsolete equipment.

At several other points in his opinion Judge McNamara found Sansoucy not credible, thus making an appeal difficult because the Supreme Court does not weigh credibility. It leaves that to the trial judge.

According to the Town Manager, refunded taxes and interest owed to Eversource are:

2012 $5,106.355
2013 $3,535.232
2014 (EST.) $3,000,000
2015 (EST.) $3,000,000
TOTAL $14,641,587

It is possible that the above amount could be bonded for 20 years at 4% interest costing about $1,000,000 a year to pay over time for principal and interest.