Setting city taxes gets ‘complicated’
STAMFORD — In the meeting that established the tax rate for the next fiscal year, members of the Board of Finance raised a question many residents ask when they look around the city.
Why, considering all the development going on, do taxes still go up?
The city collects more revenue each time a new property is added to the tax roll, so there should be no need to raise rates, Republican member Kieran Ryan said last week as the board decided levies for 2018-19.
“There is a lot of commercial development, and there has been for a long time,” said Ryan, a real estate attorney. “The city always promises tax relief, but it doesn’t materialize. Property taxes go up year
Residents need a break, Ryan said.
“The median income in Stamford is flat, and has been for 10 years,” he said. “Since 2003, the average value of a typical singlefamily home has remained flat, but in that same period, taxes have increased significantly. In some cases, they have doubled.”
So even though the board lowered the average mill rate, which determines how much a property will be taxed, by 4.6 percent, Ryan and the other Republican board member, Sal Gabriele, voted against it.
“Mayors, going back to Dan Malloy 20 years ago, always say development will help the community by lowering taxes and paying for infrastructure improvements,” Gabriele said. “Yet, taxes keep increasing and the roads are still in terrible shape. I don’t see how it works for the average taxpayer.”
But it does, said board chairman Richard Freedman. He and the other Democrats voted 4-2 to pass new mill rates for the city’s four taxing districts, which average out to 25.28.
“The fact is that development has kept taxes down. It adds to the Grand List, which increases the tax base,” Freedman said. “When there are more taxpayers, the share for each is less.”
Tax rates are the product of two things, Freedman said — the increase in expenditures and the change in the Grand List, which is the total of all taxable property in the city.
“Expenditures go up, at least, with inflation, and often faster than inflation,” Freedman said. “The reason they often go up faster is that pension obligations are growing faster than inflation. So even if the city has the exact same number of employees year after year, wages will go up about 2 percent — roughly the rate of inflation — and pensions will go up 6 percent to 10 percent.”
Pensions, along with health-insurance costs, which also rise faster than inflation, comprise about a quarter of the city budget, “so the only way to keep spending fixed is to reduce the head count, and the only way to do that is to reduce services,” Freedman said.
“But people want their garbage picked up, they want the streets plowed, the parks cleaned, police and fire protection, and small classroom sizes,” he said. “So you have to balance the equities, and it’s wicked complicated.”
Development makes the job easier, he said. Freedman said he has worked on five city budgets and, for each, the Grand List, fed by development, has grown at least 1 percent.
“The Grand List is roughly $20 billion. If it increases 1 percent, that’s $200 million, which is a lot of tax revenue. So if spending goes up 3.5 percent, the effective tax increase is only 2.5 percent, offset by the Grand List increase,” Freedman said.
“All this development has produced a pretty efficient taxing and spending model,” he said. “Some people may not want to hear that or believe it, but it’s the truth. We have a pretty good situation in Stamford.”
The result this budget season is an average tax increase of 1.9 percent for 2018-19. But because properties were revaluated last year, that rate will apply to almost no one. The tax bill for each property will depend on its new value, a process the city undergoes every five years as state law requires.
Taxes on single-family homes are expected to rise slightly, on average, but multifamily homes could see 30 percent increases because they priced out higher in the revaluation. Taxes on apartment buildings are expected to go up an average 8.6 percent, and commercial properties 5.5 percent.
During their meeting, finance board members hashed out how much to place in the contingency reserve, the fund that covers nonbudgeted expenses that arise during the year. Their discussion illustrates how they weigh decisions.
Mayor David Martin originally asked for $4.9 million for the contingency reserve, but a fellow Democrat on the board, David Kooris, made a motion to increase it to $6.5 million.
It’s because the domes that hold salt used during snowplowing are empty, a number of union contracts remain unsettled, police always need more overtime money and representatives “want to leave room for a strategy for parks enforcement,” Kooris said.
Then there’s the wild card, he said — funding from the state, which is battling big budget shortfalls. Last year, the city put money in the contingency reserve in case promised state aid fell through, but it wasn’t enough.
“No one last year thought the gap would be more than $2 million, and it was $4.7 million,” Kooris said. “We can justify adding to contingency just on miscalculation of state aid.”
Ryan and Gabriele said the mayor would have known that when he formulated his budget and requested $4.9 million in contingency, and he did not enumerate the last-minute need for more.
Democratic board member Mary Lou Rinaldi disagreed.
“I am probably more conservative than my fellow Democrats, but we have to have enough money to get done what needs to be done in the next year,” Rinaldi said. “We have to be ready. We can’t set the contingency so close that we are underfunded.”
Freedman underscored that.
“Had we not set aside that $2 million last year, we might be sending out supplemental tax bills to people right now,” he said.
The final tax increase struck a good balance, Democrat Dudley Williams said.
“We all make a concerted effort to keep increases as low as possible, but the other side of the coin is that there are services we need to provide,” Williams said. “We may disagree on the size of the contingency fund, but it’s not a result of being indifferent or being ignorant of the fact that even a modest tax increase presents a real struggle for individuals and families. I am acutely aware of that. I don’t dismiss it or take it lightly. These are hard decisions, and there are consequences. I’d rather the tax increase was zero, but I think 1.9 percent reflects a good effort on all our parts.”