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Article Title: City Meeting: Taxes and ServicesEdition: March 2001
Category: Montpelier City Page
Author: William Fraser, City Manager
As most people are probably aware, the city's annual "Town Meeting" election is coming right up on Tuesday, March 6th. Polls will be open at City Hall from 7:00 AM to 7:00 PM. You can also cast your ballot early by simply going to the City Clerk's office at City Hall during business hours. You can call them at 223-9500 for more details on this option.
If you are a city resident, you should have received your Annual Report by now. If you haven't and would like one, please call the City Manager's office at 223-9502. I urge residents to review the material about the city, school and other agency budgets carefully so that you understand the issues that you are voting on. Please feel free to call your public officials if you need further clarification or explanation of any item.
As I noted last month and as highlighted in the annual report, the ballot includes articles for election of city and school officials as well as approval of budgets for the city, schools, recreation, cemetery and several outside agencies. In addition, the ballot contains three special articles.
Bike Path, Street Lights & Tax Breaks
Article 10is to consider approval of a $200,000 bond for the city's share of the Central Vermont Bike Path project. This would provide the local share for construction of a bike path from Granite Street all the way to the Berlin town line near Casella's, just beyond the Cabot Headquarters at the former Reserve Center. The Montpelier segment is expected to be constructed in 2002.
Article 11is to consider approval of a $215,000 bond to improve street lighting in the downtown area. Light levels, particularly along Main Street, have been judged to be substandard by a consultant working for the city.
Article 12is to consider expanding the authority of the city to enter into tax stabilization contracts. The current authorization is for up to a 33% reduction of new taxes for a period of up to 7 years. The ballot would expand that authority to a 50% reduction for up 10 years. These changes are needed because of the effect of Act 60.
Montpelier Tax Rate FlatAlthough this year's city budget requires no tax increase and the total of all proposed budgets is only projected to raise taxes by 2.65%, the Montpelier tax rate remains a item of great concern to many voters. I have edited and I am presenting once again an arrticle that appeared in the Bridge last year that took a long look at some of the issues regarding local taxes. This proved to be one of the articles that I received the most comments about.
Why is the tax rate so high? These theories are commonly offered:
Other CommunitesLet's look at the 12 communities with the highest tax rates as per the Vermont Tax Department's 1999 report. After seeing Montpelier at number one we'll go down the list a bit further - there's our neighbor, Barre City, at # 3 while claiming the #1 municipal tax rate in Vermont (Montpelier has the highest combination of municipal and school). In fact a close examination of the top dozen tax rate towns in Vermont proves revealing.
Included in the top 12 are three anomalies Proctor, Ripton and Weybridge for whom education rates are extremely high. The remaining nine municipalities, however, form a very interesting list. In order they are Montpelier, Barre City, Springfield, Rutland City, Middlebury, Windsor, Newport City, Rockingham/Bellows Falls, and Brattleboro. The similarities are strikingly obvious. All are older communities who serve as regional centers for other towns near them. Unlike Burlington or South Burlington, they have neither the population base nor the "grand list" base to spread the costs of service delivery very widely. As a result, they all provide many direct services and maintain older infrastructure for use by people from an entire region but only paid for by residents. Many of these (Montpelier, Barre, Rutland, Middlebury, Windsor, Newport) were historically split off from the rest of their towns (i.e. Barre City and Barre Town) resulting in greatly reduced land areas compared to most Vermont towns.
This notion of expanded service delivery can be most easily illustrated by the provision of Fire service in these towns. There are only 12 full time or "paid" fire departments in all of Vermont, the 220-plus others are all run by volunteers. But of these nine top tax communities, seven have paid departments -- only Middlebury and Newport still use volunteers. And the other five communities with paid departments fit the mold as well. Burlington, South Burlington and Hartford maintain lower municipal rates through higher population or property base. The remaining two, Saint Albans City and Saint Johnsbury have the highest municipal rates in Franklin and Caledonia counties respectively, their relatively low school rates keep them out of the very highest total tax rates.
Obviously fire departments are not the only service being delivered in these communities and are not the only costs within the local budgets. Still, the jump to a paid department represents a major policy and cost shift for any town and is only made if the local people believe the need is justified. The presence of a paid Fire Department is almost always representative of expanded overall local service needs in all areas - in most cases to handle burdens caused as much by non residents as residents. Montpelier is really the "poster child" for this service phenomenon. For example, the city handles over 15,000 police incidents annually - about than two per capita - which is among the highest activity rate in Vermont along with Barre City. As comparison, Burlington only handles about one incident per capita. While our daytime population of approximately 15,000 represents jobs, customers and economic activity, these people are also getting into accidents, using parking spaces, speeding, getting injured or sick, committing crimes and causing wear and tear on roads and facilities. Under the extremely limited revenue raising options available to Vermont's towns and cities, virtually all of these costs fall to the 8,400 or so local property tax payers.
One of the major contributing factors to this situation is the steady population growth in our neighboring, more rural, towns. This is something of a "chicken and egg" situation since many people will tell you that they moved to Berlin, Middlesex, or East Montpelier to avoid Montpelier's taxes yet have handy access to our downtown, community facilities and, yes, local services. Once again, their presence in our community is felt positively through business, the arts and civic efforts but the cost of services falls on Montpelier residents alone.
With all this talk about local services, it is instructive to compare tax rates, average residential taxes and local services within our immediate region. Let's look. (See chart on facing page on right.) [Webmaster Note: You can find the information contained in the chart at the following link chart] This chart illustrates some of the tax, cost and service differences between Montpelier and its neighbors. One immediate observation is that in 1999 the School Tax Rates were fairly constant throughout. Montpelier's excellent schools don't really cost any more than our U-32 neighbors are paying.
Another immediate observation is that Montpelier is barely second only to Calais for the lowest Grand List per capita. This number represents the ability of a community to raise money for services. This means that all of these neighboring Towns (except Calais) can generate tax income for their budgets easier than we can yet we provide, by far, the most services.
The most immediate observation, of course, is that the average 1999 residential taxes for the 7,962 residents in the four towns was $2,196 per year. This was $969 or 30.5% less than the average Montpelier resident paid.
Montpelier versus Other Towns Service ComparisonsSo what did you get for the extra $18.63 per week if you're a Montpelier resident that you didn't get in the other Towns.
Full time Fire and Ambulance service based in downtown Montpelier.
Volunteer Fire and Ambulance departments do excellent jobs but they can't match the response time or training level of full time staff people. 1999 dispatch records showed an average ambulance response time of 4 minutes locally compared to 11.5 minutes in the combined towns. This difference may not seem like much but sit and watch the clock sometime thinking you're waiting for someone to provide emergency medical assistance to you or a family member.
Full Time police service based in downtown Montpelier. An 9-1-1 emergency call gets a local police officer at your door within minutes. Officers are on patrol 24 hours per day. An officer is in the school system full time. In communities served by State Police, one Trooper may be on duty covering many towns.
Paved and quickly plowed roads. 97% of Montpelier's roads are paved compared with 20% in neighboring towns. Gravel roads mean more dust, rock "dings" on vehicles and difficult access during certain seasons and weather conditions. When you're in a business rush or personal emergency, can you rely on being able to pass over your road year round? Neighboring road crews do a fine job but with an average of one person per 17.5 miles of road, one cannot expect the same service as Montpelier who staffs one person per 3.5 miles of road. And the neighboring crews don't do snow bank removal in downtown or any sidewalk plowing (since in most cases there are no sidewalks).
These are the major examples. The list is much longer though; it includes municipal water and sewer systems (rather than wells and septic tanks), storm drain systems to avoid washouts and also manage run off away from properties, City Hall Auditorium and Arts Center, swimming pool and rec facilities, and administrative conveniences like quarterly tax payments with automatic bank deductions if you want them.
Montpelier residents have many more opportunities to stay in touch with their local government than the neighbors do. Virtually all municipal and school meetings are broadcast on local Cable T.V. Both the City and School maintain comprehensive web sites for on-line access. The City's Annual Report has won awards for public presentation the last three years. Both the School and the City contribute regular features in The Bridge newspaper. The costs for all of these activities come from local budgets.
There are also many great things that Montpelier residents support that neighboring residents all benefit from at no cost or greatly disproportional cost. Hubbard Park and North Branch Park are two prime examples. Others include the Kellogg-Hubbard Library, sidewalks and bike/pedestrian paths, street sweeping, fire prevention efforts, downtown enhancement initiatives -- not to mention Design Review and Planning efforts which often extract a significant emotional toll locally yet help keep the city looking as wonderful as it does for all to enjoy.
For this full range of municipal services, Montpelier residents pay an average of $1,329 in non-school taxes. This $3.64 per day buys comprehensive public safety services, a well developed transportation network, investment in the vibrancy and vitality of downtown, easy access to local information, use of facilities like the Library or Parks and the opportunity to live in a great small city with a wonderful quality of life. Residents in the four neighboring communities pay about $520 per year or $1.42 per day for a drastically different level of municipal services. Individuals will need to make their own decisions about whether they get full value for the additional two-plus dollars per day.
Good News/Bad News from the State
The State Factor.The good news is that the State of Vermont paid the city $519,000 in Payments in Lieu of Taxes (PILOT) during the present budget year. This is a significant increase from the $125,000 they paid in 1995 and their totals have risen each year. They now pay 45-50% of their potential non-school taxes. The bad news is that the State owns property in Montpelier valued at $85-$93 million (depending on which way they count it - we don't get to count it). The top 10 private land owners in the city own properties which total $66.5 million. State property values equal about 20% of the city's Grand List.
Still, before we lay everything at the state's feet, its important to realize that if they paid 100% of their municipal taxes (school taxes are already equalized through Act 60), the local tax rate would drop by 12 to 15 cents. Significant yes, but not enough to drop us out of that top 12 list.
Grand List Expansion?
Grand List Expansion.One commonly cited strategy for reducing taxes is growth of the Grand List, or adding large amounts of taxable properties to the tax rolls. While this may have many other benefits such as increased employment and housing opportunities, one must look at this carefully from a property tax standpoint. Using pure math, every increase in property valuation of $3.2 million dollars reduces the property tax rate by one cent, yes that's correct - one cent. One cent equals $10.70 to the average residential tax bill. And that assumes that there is no corresponding increase in service expense required since every $41,300 of expense raises the tax rate one cent.
In theory, then, new taxable property totaling $32 million dollars which required no new expenses would reduce the tax rate by 10 cents or $107 for the average resident. To put that in perspective, the entire downtown business district combined is valued at $25.5 million. Not to mention that a 10 cent reduction, while helpful, still keeps us in that top 12 group.
Expenses.If we can't control what the state pays us, and we aren't allowed alternate revenue sources and if grand list growth isn't the answer, what can we do? The one area that we have control over locally is expenses. This, then, turns right back around to the issue of services that was discussed earlier. The city's total tax rate in FY01 was about 69 cents higher than the average of twelve neighboring communities. That translates to $740 for the average resident which is the kind of money that gets people asking questions in the first place.
To reduce the budget in order to match the neighboring tax rates would require us to cut $2.85 million in municipal taxes or 58% of the municipal budget. Under this scenario, the list of services and amenities offered would much more closely resemble the neighboring towns on the above charts. Even a 10 cent reduction requires a $413,000 or 8.5% budget/service cut and the taxes would still be high. Except then people would be paying high taxes for lesser services. The relationship of service levels to taxes is very direct.
Prognosis.The city is not giving up. We continue to examine our expenses, budgets and service levels closely as evidenced by the 0% tax increase proposed this year. We try to promote responsible tax property growth and work diligently to increase state PILOT payments. We continue to advocate for a broader range of revenue options so that the many people who impose service demands on the city can share in the burden of paying for services. As our neighbors tax rates inch up (and they are all going up at higher rates than ours) we hope that we can continue to hold the line, continue to deliver outstanding services, seek other funding sources and eventually narrow the gap between the city and the surrounding towns.
The Empire Strikes BackWhile discussing expenses and budgets, I feel compelled to comment on recent stories that appeared in The Bridge and The Times-Argus concerning pay levels for Montpelier department heads. Both stories left out large pieces of information and failed to place much of the information they did use in appropriate perspective. It would require an article as long as that which I have just written to provide a full and proper analysis but I will touch on some important points.
The major point is that the city did not undertake a comparative study of salaries and then conclude that department head pay was too high as suggested in both articles. Due to the factors discussed above, the city set out to study the service levels delivered in some comparable communities. This was to be a very comprehensive project which looked at number of employees, what they did, services delivered, quality of services, budgets, equipment, etc. A very complete questionnaire was developped which was shared with both reporters. To get the best picture of these communities, city officials are planning to make day long visits to them to review their operations. Since such visits are time consuming, we chose to limit the number of commmunities to a manageable size.
After looking at a variety of characteristics, we unscientifically selected Barre, Bennington, Brattleboro, Hartford, Middlebury, St. Albans, St. Johnsbury, South Burlington and Springfield to review. This gave us 10 communities counting Montpelier. In preparation for this upcoming effort, I assembled a great deal of raw data from the Vermont League of Cities and Towns annual wage/salary/budget survey about those communities - including pay levels of not only department heads but all city positions. While I have no doubt that the information reported in the survey is accurate on its face, it is still very difficult to compare. For instance, do total reported budgets include water and sewer funds or just general funds? Why does one community report total personnel costs that are greater than the total they reported for their entire budget? There are many other inconsistencies like this which require much closer scrutiny before reaching any useful conclusions.
The figures published in the articles isolated department head pay figures and compared them to only these other nine towns. Even after I pointed out problems with the data, they erred in some very significant ways. For example, both articles focused on the apparent observation that the Assessor's pay was supposedly 53.9% higher than others. They failed to report that four of the nine communities in this grouping use part time private contractors for assessing work and another only has a half time employee. In one case the contract rate is only $5,000 per year or very minimal services delivered. Yet these numbers were stacked up and averaged with the pay for full time positions. The discussion of whether full time or part time assessing services is necessary is certainly fair game. To inaccurately suggest that a position is wildly overpaid based on such very limited sampling is irresponsible.
The irony is that neither the press nor the public would let city officials get away with reaching conclusions based on such incomplete information. The city had just begun to assemble material to undertake a long effort toward developing something useful. We had certainly not rushed to any judgments about budgets, staffing levels, services or pay levels based on the raw preliminary data we had. This process will continue throughout this year for review during next year's budget process.
There are many pieces of information which were/are readily available which might have been of interest to readers and helped place the information in context. How long have department heads served compared to others? (31% longer) How many people do they supervise, what are they responsible for? (13% more employees) Whhat were there backgrounds an qualifications coming into these jobs? How do other benefits, health insurance contributions, etc, compare? What do other city employees earn in relation to department heads? What do Montpelier school officials/employees earn in relation to city officials other school employees? What do city residents earn, are public salaries out of whack with the community? According to a 1999 Tax Department report, for instance, 33% of Montpelier residents filed income taxes with adjusted gross incomes of $40,000 or more and 25% were $50,000 or more.
Finally, I will note that the published difference between Montpelier pay and the "average" pay amounts, in total, to less than two tenths of a percent of the total city budget. Leaving myself out of the equation, I am positive that each of our Department Heads saves the city much more than that on a regular basis through innovation, experience and ability. They are all worth every nickel. They are certainly "above average" while providing the wide array of excellent services for Montpelier, itself an "above average" community. That's the bottom line for me and, I hope, for the community.
As always, please feel free to contact me at email@example.com or at 223-9502 if you have questions or comments about this article. Don't forget to vote on March 6th.
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