Fearing coronavirus fallout, city and town officials look to slash budgets

Valley News Staff Writer
Published: 5/16/2020 9:59:21 PM
Modified: 5/16/2020 9:59:19 PM

LEBANON — Municipal officials in several Upper Valley towns are looking to cut their budgets, with at least one warning of possible layoffs, as the economic crash from the COVID-19 pandemic strains the ability of many property owners to pay their taxes on time and also threatens other key revenue sources, including state aid from Concord and Montpelier.

Some cities and towns plan to cut programs, such as summer camps and employee training sessions, that were unlikely to continue under social distancing guidelines, while others say they’re no longer filling empty positions.

Local officials also are calling on Congress to pass a stimulus bill that would allow them to recoup some of the losses municipalities are likely to face as the Twin States experience unemployment levels not seen in decades.

Lebanon expects to soon cut more than $800,000 from its $36.8 million operating budget, with more “painful” cuts possible if the city’s financial outlook worsens.

“If further reductions need to be made, it would involve the layoffs of personnel,” City Manager Shaun Mulholland said in a phone interview last week.

So far, he said, cuts have focused on training, scanning of city documents, and some programs, such as a trial to treat roadways with a salt brine solution during winter snowstorms.

While it hasn’t officially been determined, Mulholland expects summer recreation programs and Lebanon’s Veterans Memorial Pool to remain closed this summer. That means he isn’t rehiring part-time seasonal staff the city traditionally relies on.

Lebanon also is assuming the state will delay or cancel several infrastructure projects because of New Hampshire’s projected revenue problems.

The projects include a $3 million effort to reconstruct the Mechanic, High and Mascoma street intersection downtown; repairs to the Route 12A “Dry Bridge” in West Lebanon; and demolition of old buildings in the Westboro Rail Yard.

Mulholland told the City Council on Wednesday that Gov. Chris Sununu said in a recent conference call that the projects will be put on hold, but the city hasn’t yet received official word from the state.

Money from the state meals and rooms tax, which the city projected could bring in $700,610 this year, remains up in the air as well, Mulholland said. The same is true of highway block grants, which are reliant on the gas tax, and revenue sharing negotiated into the state budget.

Overall, the city estimates there could be a 10% drop in revenue, equal to about $5.8 million, which would have to be made up with cuts, layoffs and tapping into surplus funds.

Lebanon has roughly $12 million in surplus money, but much of that is dedicated to paying off debt from the city’s $75 million effort to separate sewer and stormwater in 15 miles of sewer system. Without those funds, Lebanon residents could see sharp increases in their water and sewer bills or their property taxes as the debt comes due.

“The unassigned fund balance is not an endless amount of money,” Mulholland said in the phone interview. “The city needs to have a basic amount of reserves.”

Other communities say they’re readying budget cuts but hope the tax fallout won’t put essential services or positions on the chopping block.

Canaan Town Administrator Mike Samson said his staff identified about $200,000 in spending that could be eliminated from the town’s roughly $3.5 million budget. But, he said, serious measures could be called for if people fail to pay property taxes on time.

Canaan collects about $10 million in taxes for town operations, the Mascoma Valley Regional School District and Grafton County, and it’s legally obligated to pay the full share to the county and schools.

So if 10% of taxpayers fail to pay their bills, the town could be left to manage a $1 million shortfall.

“We will do what we can without cutting services that are critical,” Samson said. “We will do what we can to try to balance part of that out of operating budget.”

Meanwhile, Norwich Town Manager Herb Durfee said he plans to start asking department heads “if scenarios,” such as “if you had to not spend 10% of your budget, where would you not spend that?”

He said the Norwich Selectboard and Finance Committee also are working to identify possible problems and plan for the coming year.

“I do not have an idea of what position individual households are in with regard to their ability to pay taxes for the coming year. That’s what we don’t know,” Durfee said. “At some point, we have to try to figure that out as best we can.”

Hanover also will begin to discuss its budget on Monday, according to Town Manager Julia Griffin.

She said the town isn’t likely to make “substantial cuts” but could “throttle back” on some expenditures.

While they’re preparing for the worst, officials say there are signs the economic downturn may not be as difficult on municipalities as some are predicting.

For instance, historical data shows that while late property tax payments rose after the 2008 recession, Lebanon issued roughly the same amount of tax liens. That means people ultimately were paying tax bills, even if they weren’t on time.

Lebanon Deputy City Clerk Kristen Kenniston told the City Council on Wednesday that motor vehicle registrations are now down by about 4% but it’s possible that can be attributed to temporary plates, which can be used until the end of May under New Hampshire’s state of emergency.

“There were quite a few weeks where we weren’t doing a lot of new registrations because people had all that time,” she said. “I don’t think we’re going to be too far off this year.”

Canaan and Hanover reported either slight drops or steady motor vehicle fees coming in over the past few months as well.

There’s also hope that the Upper Valley’s core towns will fare better than neighbors, both because of lower unemployment figures and wealthier residents who will be able to pay property taxes.

Lebanon’s “COVID-19 Affected Unemployment Rate” stands at 13%, which is 4 percentage points lower than Grafton County as a whole, according to New Hampshire Employment Security.

Hanover’s unemployment rate, at 3.4%, was the lowest in the state. By comparison, Claremont saw an unemployment rate of 16.3% by May 2, and Canaan’s rate was 17.3%.

However, those figures don’t tell the full story and only account for unemployment claims filed since March 15. They also leave out New Hampshire residents who work out-of-state and file for benefits there. The Vermont Department of Labor doesn’t release similar town-by-town figures.

The school situation is also precarious. In Vermont, for instance, state officials said the Education Fund may face a $160 million shortfall in the 2020-21 school year.

Municipal officials are also watching negotiations in Congress, where the Twin States delegation is supporting a $3 trillion stimulus bill that includes nearly $1 trillion for state and local governments.

But Republicans, who control the Senate, have opposed past measures to deliver aid to shore up revenue shortfalls, and President Donald Trump has called the relief package “dead on arrival.”

“We’ll all be watching it really closely and just have a ball up in the air right now as we juggle trying to figure out how to maintain service levels, not lay off employees and yet be mindful of people’s ability to pay for services,” said Griffin, Hanover’s town manager.

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

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