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Lebanon council considers city budget uprooted by coronavirus

Valley News Staff Writer
Published: 6/4/2020 9:54:16 PM
Modified: 6/4/2020 9:54:06 PM

LEBANON — City leaders are struggling to craft a budget for next year after being warned that spending cuts could trigger “significant layoffs” and a reduction of municipal services.

Some city councilors argued Wednesday that Lebanon should stay the course with a budget that would require a planned 3% increase in the municipal tax rate for 2021.

The increase, they argued, is needed to pay off sewer debt and would prevent residents from seeing more drastic hikes in the coming years.

But other councilors countered that Lebanon’s homeowners are already burdened with high property taxes and sewer and water fees. The economic damage from the coronavirus pandemic could make matters worse, they added.

City Councilor Bruce Bronner said he’s living on a fixed income and cautioned that additional tax increases could force him to move.

“I personally don’t know how much longer I’m going to be able to hold out if we go up 3% a year,” he said during the City Council meeting, which was held via teleconferencing software.

Wednesday night’s debate was unusual for the nine-member board, which typically delivers budget guidance to department heads every May. That guidance then normally leads to a December budget vote that’s rarely contentious.

However, Lebanon no longer enjoys the 2.2% unemployment rate — once one of the lowest in New Hampshire — it had before the pandemic.

As of April 20, the city’s unemployment rate stood at 12.2%. More than 1,000 Lebanon residents also filed for unemployment benefits between March 15 and May 16, according to New Hampshire Employment Security.

“Budgeting is always a difficult and a challenging process,” but uncertainty stemming from the virus makes the job even harder, Mayor Tim McNamara said in a phone interview Thursday.

City officials are waiting to see what comes in by the July 1 deadline for paying property taxes, which could indicate the severity of Lebanon’s economic downturn, he said.

“Will (residents) be able to pay their property taxes? Will they be able to pay all of them? Will they be able to pay a portion?” McNamara said, sampling just some of the unanswered questions facing budget writers.

City leaders also are wondering whether Congress will bail out municipalities across the country facing similar tough choices.

Lebanon operates on a calendar year budget, and city officials are already expecting to cut $800,000 from the $36.8 million operating budget for 2020, and fears of revenue shortfalls are prompting other Upper Valley communities to make similar plans.

Economic worries led city councilors last month to consider a lower projected tax rate for 2021, and City Manager Shaun Mulholland was asked to draft proposals.

Holding the tax rate level would force the city to make $817,000 in spending cuts because of automatic increases, such as negotiated pay hikes. Holding the tax-rate increase to 2.5% would still require finding $256,000 in savings, Mulholland said.

“Lean” budgets were already being planned for the next few years, so further measures to contain spending could result in deep cuts to staff and services. Mulholland told the City Council. During the next two years, he said, Lebanon plans increases only to fixed costs, such as negotiated salaries and health insurance.

“It’s not going to be a pretty year at all,” he said. “It’s not going to be a comfortable year, that’s for sure.”

Lebanon’s budget woes are further complicated by debt payments to the $75 million combined sewer overflow, or CSO, projects.

The city for years has set aside surplus funds to pay off the court-ordered construction separating sewer and stormwater in 15 miles of Lebanon’s sewer system, anticipating that much of the debt will come due in 2021 and 2022.

By cutting next year’s budget, the city could fail to set aside enough money for debt payments and either trigger higher taxes in 2022 or drain Lebanon’s rainy day fund.

“What we do in 2021 can have a dramatic impact on 2022 and beyond,” McNamara told the City Council on Wednesday.

But Councilor Karen Liot Hill said it would be “tone deaf” for the city to increase taxes during the economic crisis.

Liot Hill added that she’s heard regularly from residents that past 3% tax increases were unsustainable.

“I think we have to be very sensitive to the economic environment that we are in,” she said. “I cannot support a 3% (tax rate) increase based on the information we presently have.”

The City Council ultimately decided against providing budget guidance on Wednesday. For the time being, department heads are planning for the 3% tax increase with the hope that Lebanon’s economic woes will turn out less severe than some are predicting, Mulholland said.

The City Council could also reenter budget discussions in July after tax bills are due and more information is available.

Tim Camerato can be reached at tcamerato@vnews.com or 603-727-3223.




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