New Hampshire Municipal Tax Rates: How Are They Calculated New Hampshire Municipal Tax Rates: How Are They Calculated? And How Do They Change? March 27, 2017 Stephan W. Hamilton, Director Municipal & Property Division NH Department of Revenue Administration John T. Beardmore, Commissioner Lindsey M. Stepp, Assistant Commissioner 109 Pleasant Street, Concord, NH 03301 603-230-5000

New Hampshire Municipal Tax Rates Rick Evans, Timber Tax Appraiser, Municipal and Property Division New Hampshire Municipal Tax Rates This presentation is intended for informational purposes only, and is not a substitute for seeking professional advice or for reviewing the applicable laws and rules. This presentation represents some positions of the Department on the limited issues discussed herein, based on the law in effect at the time of the presentation and Department interpretation thereof, as well as the opinions and conclusions of its presenter. For the current status of any tax law, practitioners and taxpayers should consult the source documents (i.e., Revised Statutes Annotated, Rules, Case Law, Session Laws, etc.) for independent verification. Page 2

Stephan W. Hamilton, Director, Municipal & Property Division Presentation Goals Demonstrate the calculation which determines local tax rates calculated for each community. Understand basic formula of statewide tax rate calculation. Review the source of information for each calculation. Identify the elements that compose a local tax rate for a city or town, including: Local municipal tax rate County tax rate Local school tax rate State education tax rate Review how changes in total tax commitments and assessed value can affect the calculation of the rate. Page 3

Setting of Tax Rates by Commissioner Stephan W. Hamilton, Director, Municipal & Property Division Setting of Tax Rates by Commissioner RSA 21-J:3, XV Establish and approve tax rates as required by law. RSA 21-J:35 I The commissioner of revenue administration shall compute and establish the tax rate of each town, city, or unincorporated place. Why does the DRA have to set the rates? Isn’t this something that the towns could do on their own? The following presentation may provide a lot of background on why that might not be practical! Page 4

Establish 1,150 Property Tax Rates Stephan W. Hamilton, Director, Municipal & Property Division Establish 1,150 Property Tax Rates 259 Local municipal tax rates 259 School tax rates 259 State education tax rates 259 County tax rates 114 Village districts tax rates Total of 1,150 individual tax rates Accuracy rate: 99.91% Review 6,500 tax rate documents Page 5

Stephan W. Hamilton, Director, Municipal & Property Division Basic Process The tax rate for each community is constructed from locally derived financial data. Each city or town’s rate is composed of a minimum of four components: Local municipal tax rate County tax rate Local school tax rate Statewide education tax rate Page 6

Basic Process (Continued) Stephan W. Hamilton, Director, Municipal & Property Division Basic Process (Continued) Depending on the complexity of the city or town, there may be more components: Cooperative school districts Village districts Three basic elements for each component: Total gross appropriation Estimated revenues Total locally assessed values Page 7

Simple Formula! (Appropriations – Estimated Revenues) Stephan W. Hamilton, Director, Municipal & Property Division Simple Formula! (Appropriations – Estimated Revenues) Total Locally Assessed Values MS-4 MS-2 MINUS Adjustments to appropriations, etc MS-1 Page 8

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Calculating Municipal Tax Rate per $1,000/value Stephan W. Hamilton, Director, Municipal & Property Division Calculating Municipal Tax Rate per $1,000/value Gross Appropriations less Revenues (not including fund balance) less Fund Balance Voted less Fund Balance to Reduce Taxes plus War Service Credits plus Overlay divided by Locally Assessed Property Valuation (per line 21 of MS-1) x 1,000 = Municipal Tax Rate per 1,000 Page 11

Municipal Tax Rate Page 12 Stephan W. Hamilton, Director, Municipal & Property Division Municipal Tax Rate Page 12

County Rate County Net Appropriation Stephan W. Hamilton, Director, Municipal & Property Division County Rate County Net Appropriation x town’s previous year equalized value as % of total county = Town’s County Assessment divided by Locally Assessed Property Valuation (per line 21 of the MS-1) x 1,000 = County Tax Rate per 1,000 Page 13

County Apportionment Page 14 Stephan W. Hamilton, Director, Municipal & Property Division County Apportionment Page 14

Stephan W. Hamilton, Director, Municipal & Property Division County Tax Rate Page 15

Local Education Tax Rate per $1,000/value Stephan W. Hamilton, Director, Municipal & Property Division Local Education Tax Rate per $1,000/value Net School Appropriations less State Grants and Statewide Education Tax divided by Locally Assessed Property Valuation (per line 21 of MS-1) x 1,000 = Local Education Tax Rate per 1,000 AND/OR Page 16

Locally Apportioned Education Tax Rate per $1,000/value Stephan W. Hamilton, Director, Municipal & Property Division Locally Apportioned Education Tax Rate per $1,000/value Regional School Apportionment less State Grants and Statewide Education Tax divided by Locally Assessed Property Valuation (per line 21 of MS-1) x 1,000 = Local Education Tax Rate per 1,000 Page 17

Local Education Tax Rate Stephan W. Hamilton, Director, Municipal & Property Division Local Education Tax Rate Page 18

Statewide Education Tax Rate Stephan W. Hamilton, Director, Municipal & Property Division Statewide Education Tax Rate Statewide Education Amount rate producing $363 million = $2.420 $2.420 x Town’s previous year Equalized Value w/out Utilities (Prior Year) Divided by Locally Assessed Property Valuation Without utilities (Current Year) (Per line 23 of MS-1) x 1,000 = Statewide Education Tax Rate per 1,000 Page 19

Statewide Education Tax Rate Stephan W. Hamilton, Director, Municipal & Property Division Statewide Education Tax Rate Page 20

Statewide Education Tax Rate Stephan W. Hamilton, Director, Municipal & Property Division Statewide Education Tax Rate Page 21

Statewide Education Tax Rate Stephan W. Hamilton, Director, Municipal & Property Division Statewide Education Tax Rate Page 22

Statewide Education Tax Rate Stephan W. Hamilton, Director, Municipal & Property Division Statewide Education Tax Rate Important facts to remember about Statewide Education Tax: The money is raised locally The money is retained locally to offset education costs It becomes revenue to local education effort Page 23

Stephan W. Hamilton, Director, Municipal & Property Division Changing Tax Rates There are many factors that contribute to the calculation of local tax rates. Many factors change from year to year and may have an impact on rates. One factor causing an impact is the locally assessed valuation of property. Let’s review a couple of ways to consider the impact of locally assessed value on tax rates. Page 24

3 Year Statewide Tax Rate Stephan W. Hamilton, Director, Municipal & Property Division 3 Year Statewide Tax Rate   2015 Municipal $ 7.70 County $ 1.70 Local Education $ 20.54 State Education $ 2.42 Total $ 32.36 Page 25

3 Year Statewide Tax Rate Stephan W. Hamilton, Director, Municipal & Property Division 3 Year Statewide Tax Rate   2015 2014 Municipal $ 7.70 $ 5.02 County $ 1.70 $ 1.52 Local Education $ 20.54 $ 17.46 State Education $ 2.42 $ 2.48 Total $ 32.36 $ 26.48 Page 26

3 Year Statewide Tax Rate Stephan W. Hamilton, Director, Municipal & Property Division 3 Year Statewide Tax Rate   2015 2014 2013 Municipal $ 7.70 $ 5.02 $ 4.17 County $ 1.70 $ 1.52 $ 1.62 Local Education $ 20.54 $ 17.46 $ 17.63 State Education $ 2.42 $ 2.48 $ 2.28 Total $ 32.36 $ 26.48 $ 25.70 Page 27

3 Year Statewide Tax Rate Stephan W. Hamilton, Director, Municipal & Property Division 3 Year Statewide Tax Rate   2015 2014 2013 Municipal $ 7.70 $ 5.02 $ 4.17 County $ 1.70 $ 1.52 $ 1.62 Local Education $ 20.54 $ 17.46 $ 17.63 State Education $ 2.42 $ 2.48 $ 2.28 Total $ 32.36 $ 26.48 $ 25.70 Full Value Rate - $ 28.41 $ 27.92 Page 28

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Stephan W. Hamilton, Director, Municipal & Property Division Changing Tax Rates Changes in cooperative school apportionment and net appropriation may drive tax rate changes. Some apportionment formulae rely on valuation (in part or in whole), while others are more sensitive to student population. Education expenses typically make up most of local property taxes. In Orford, over the last three years 75% of the local tax rate is for education. Page 30

Orford Share of Rivendell Apportionment Stephan W. Hamilton, Director, Municipal & Property Division Orford Share of Rivendell Apportionment Page 31

Orford Total Education Tax Effort Stephan W. Hamilton, Director, Municipal & Property Division Orford Total Education Tax Effort Page 32

Stephan W. Hamilton, Director, Municipal & Property Division Changing Tax Rates Reductions in revenue also impact tax effort and resulting tax rates. Use of Unassigned Fund Balance (UFB) to reduce the tax rate is revenue. Recent changes in the amount of UFB used in the tax rate calculation has an impact on rate calculation. Page 33

Orford Unassigned Fund Balance Used in Tax Rate Calculations Stephan W. Hamilton, Director, Municipal & Property Division Orford Unassigned Fund Balance Used in Tax Rate Calculations Page 34

Orford Total Municipal Tax Effort Stephan W. Hamilton, Director, Municipal & Property Division Orford Total Municipal Tax Effort Page 35

Orford Total Municipal Tax Effort Without Use of UFB Stephan W. Hamilton, Director, Municipal & Property Division Orford Total Municipal Tax Effort Without Use of UFB Page 36

Stephan W. Hamilton, Director, Municipal & Property Division Changing Tax Rates Increasing expenditures usually lead to increased net appropriations. The net tax effort is divided by locally assessed value. If there is an increase in the amount of money to be raised, tax rates will rise if all other factors remain the same. In Orford, the amount of money to be raised increased by about 12%. Total local assessments dropped by 7.5%. Page 37

2014 Statewide Tax Effort, Valuation and Tax Rate Stephan W. Hamilton, Director, Municipal & Property Division 2014 Statewide Tax Effort, Valuation and Tax Rate 2014 As Calculated   Tax Effort Valuation Tax Rate Municipal $ 734,250 $ 146,232,874 $ 5.02 County $ 222,640 $ 1.52 Local Education $ 2,553,315 $ 17.46 State Education $ 355,459 $ 143,578,774 $ 2.48 Total $ 3,865,664 $ 26.48 Page 38

2015 Statewide Tax Effort, Valuation and Tax Rate Stephan W. Hamilton, Director, Municipal & Property Division 2015 Statewide Tax Effort, Valuation and Tax Rate 2015 As Calculated   Tax Effort Valuation Tax Rate Municipal $ 1,039,895 $ 135,087,611 $ 7.70 County $ 229,690 $ 1.70 Local Education $ 2,774,901 $ 20.54 State Education $ 321,651 $ 132,897,911 $ 2.42 Total $ 4,366,137 $ 32.36 Page 39

Changes in 2015 Tax Effort 2015 Tax Effort 2014 Tax Effort Stephan W. Hamilton, Director, Municipal & Property Division Changes in 2015 Tax Effort   2015 Tax Effort 2014 Tax Effort Increase (Decrease) Municipal $ 1,039,895 $ 734,250 $ 305,645 County $ 229,690 $ 222,640 $ 7,050 Local Education $ 2,774,901 $ 2,553,315 $ 221,586 State Education $ 321,651 $ 355,459 $ (33,808) Total $ 4,366,137 $ 3,865,664 $ 500,473 Page 40

Stephan W. Hamilton, Director, Municipal & Property Division Questions? Page 41