Op-Ed: Budget Update and New Mill Rate

[Todd Lavieri is chair of the Board of Finance.]

In our effort to continue to provide up to date information, here are some background facts and context to get everyone up to speed with where we are as we set the mill rate for next year’s budget which begins on July 1^st.

Right now, we are projected to finish the year with a $3.9 million surplus. Expenses will be about $1.8 million less than budgeted, and our revenue will be $2.1 million more than budgeted. While that is very good, it is a little below our earlier expectations driven by slightly less revenue in some areas. Our goal every year is to give our surplus back to the taxpayers and we will do it again this year.

During this budget process from January through to our approval vote in April, the Board of Finance, the Board of Selectman, and the Town Council collectively cut the operating expenses and increased revenues for a combined $5.3 million from the original requests by the departments. And we cut $9.7 million of capital requests out of next year’s budget as well during the budget process. Thank you to all the departments and town bodies again for all their efforts to provide the services our town needs and expects. In spite of the cuts, we still funded the school budget, fire, police, Parks & Recreation, and public works, among all the other priorities and requests put forth for next year’s budget.

Over the past five years our average increase in the amount raised by taxation is 1.43%. This is an excellent achievement, and well below inflation, and contracted labor increases. This result also helped us avoid millions of dollars in additional taxes.

Turning to this year, let’s start with the Grand List. As previously communicated, it increased 23.5% coming out of the most recent revaluation driven by the rise in property values throughout town. This increase was slightly less than originally expected.

From a budgeted expense perspective, the biggest increases in the budget this year are for our schools. Operating expenses will increase $3.2 million or 3.67% year over year, and within the guidance range that was given. The Board of Education healthcare expenditures are up $2.86 million or 19.4%. Town expenditures for all the town departments will increase 3.95% or $2.1 million. In summary, total town expenditures are up 5% y/y.

The Board of Finance approved moving the $3.9 million surplus plus another $1.1 million from the general fund for a total of a $5 million drawdown to give back to the taxpayers and lower the mill rate. With that $5 million, the amount to be raised by taxation is $158m, up 5.27% y/y. The mill rate would decline to 16.14, a decrease of 14.76% from last year.

What does this mean for property taxes? The town of New Canaan has 7,230 properties. Under this scenario, 1,870 properties or 25% of the total, will see a decrease in their property taxes next year. 75% will have an increase.

2,900 properties will see tax increase between $0 and $2,000. Of those 2,900 properties – breaking it down a click further, 875 of them would see an increase between $0 and $750 next year. And the remaining 2,025 will see an increase between $751 and $2,000.

And 2,460 properties will see a property tax increase of $2,000 or more. For these properties that will see a tax increase of $2,000 or more, the average increase in the value of those properties was 74.5%. 1,800 properties in town, or 25% of the total number, saw increases in their property values of 35% or more.

Putting it all together, 66% of the properties will see either a decrease, or an increase between $0 and $2,000. 34% will see a tax increase greater than $2,000. One guideline – if your property value increase was 19% or less, you will likely see a decrease in your taxes, or a very modest increase of $200 on average. If your property value increase 20% or more, then you will see an increase in property taxes.

We will also have a $1.3 million tax cut on automobiles owned by residents. A lower mill has a positive impact on vehicle taxes. Between the depreciation of the vehicles, plus the lower mill rate, the amount collected for vehicle taxes declined $1.3 million y/y.

With the $5 million drawdown, we retain a fund balance of just under 11% of our budgeted expenses, slightly above our targeted guidance minimum of 10% and the level Moody’s is looking for us to achieve in their rating reviews and guidance.

Lastly, our average annual increase in the amount raised by taxation over 7 years including next year’s budget is 2.1% – an increase which compares well with our surrounding towns even with a higher than average increase next year.

As always, I would like to thank our Board of Finance for the many hours spent over the past year working to optimize your tax dollars including capital investments, and spend that money carefully across our schools, our public safety departments, our roads and bridges, our wonderful parks, and our other town programs and assets.

Todd Lavieri,

Chairman