Nashua's Tax Rate Rises By 3.9%; COVID-19 Brings Future Worries

NASHUA, NH — The state Department of Revenue Administration has approved the city of Nashua's property tax rate of $22.61 per $1,000 value for this year.

The tax rate is a 3.9 percent increase — or 85 cents higher than last year, according to city officials. The increase is mainly driven by about $3 million more in health care costs as well as lost revenues due to the new coronavirus pandemic. The increase means that a home assessed at $250,000 will pay $5,652.50 annually for city and school services — $212.50 more than last year.

Assessments in the city will remain the same but will be revaluated in 2022, according to Mayor Jim Donchess.

Nashua, he said, is facing three mayor financial challenges: The health care cost increases, which get worse year after year, a downshifting of more than $4 million in pension costs to the city by the state, and a drop in school aid of around $6 million next year, according to preliminary estimates by the state.

"The state is slamming us," Donchess said.

The health care costs were such a concern that city officials have been working on a solution to lower costs by around $3.3 million — including plan design changes, "modest increases" on prescription drug copays, and some deductibles for surgical procedures, that will reduce costs and save the city money, he said.

"Weekly payments by employees will also go down," he said.

But the changes will only work if all employees agree to them. Not all of the employees have, he said, although many, including unaffiliated workers at city hall, communication workers at police department, and library employees have — with two other groups that were "almost ready … very close" to agreeing to the changes.

But one thing that may cause issues is a new firefighter contract that proposes a 15.5 percent pay increase across four years which, Donchess said, was just too lucrative. He hoped to be able to stop its approval this week. Donchess said firefighters were offered an 11 percent increase across four years last year, like the package received by the police sergeants in 2018, but it was rejected.

"I thought it was a little too much," Donchess said. "The aldermen approved it. It seemed fair though; it was the same 11 percent. So, it was a reasonable offer to seek uniformity across the contracts."

But now, nearly a year later, with the coronavirus causing havoc with revenues and the downshifting costs from the state expected in six months, the current proposal is not feasible.

"We appreciate the firefighters," he said. "They do a great job and it's not like I think they don't deserve a raise; it's not like we don't think they deserve a contract. But (with COVID-19) it will be a lot harder to pay that 11 percent" never mind 15.5 percent.

Tom Wholey, the president of the IAFF 789, Nashua's firefighter's union, did not return an email or phone call for comment about the contract.

Looking toward the future, the school aid cut is of great concern to Donchess with a potential loss of $6 million due primarily to declining enrollments and a lower free and reduced lunch payment from the state. He said enrollments have been "pretty stable" across the city's 17 schools in recent years. According to data online, Nashua had 12,027 students during the 2009-2010 school year. Five years later, that number dropped to 11,530. Last year, the city had 10,774 of an "average daily membership" of students, the way the state designates enrollments. But hundreds of children have left the system to be home-schooled or placed in private schools due to the coronavirus, Donchess said, and the state now estimates the city has 10,111 students this year — a drop of 663.

John Griffin, the chief financial officer for the city, said Caitlyn Davis, the director of the Division of Education Analytics & Resources for the New Hampshire Department of Education, sent the city an email last week giving them preliminary revenue estimates for next year, so that cities can plan budgets — with Nashua receiving $32.8 million instead of $38.3 million or a reduction of more than $5.5 million.

The drop in enrollments will force the city to make due with nearly $2.5 million less based on last year's $3,709 per student the city receives from the state.

Griffin said the finances were not just enrollments though but also a reduction in the number of families filing for free and reduced lunch — which went from 4,651 students last year to 3,178 this year. This is the downside of the free food being handed out to any student who asked for it or needed it in Nashua in the wake of the coronavirus pandemic — hundreds of families did not fill out the free and reduced lunch forms and the city will now not receive $1,854 extra per student to offset the cost of feeding children who live in poverty. That is another potential $2.4 million hit to the city.

According to the estimates, Nashua will also see lower special education differentiated aid, English language learner aid, and Grade 3 reading grant money, too.

Donchess said it would be difficult to find savings due to lower enrollments since the drop in enrollments was spread across 12 grades not a lump sum in a grade or two, where there could be efficiencies. Cuts in staff will lead to larger class sizes.

"Until you get to a certain level, you don't really save anything," he said.

Another suggestion from members of the community has been to back out of a $1.8 million purchase of a building on Franklin Street used by Brentwood Academy, a therapeutic high school special education program that serves Nashua students and students from surrounding school districts. Right now, the city rents the space. But by buying the building and moving it in-house, the city will save money in the long run, he said.

In the letter, Davis said "many districts" experienced "large decreases from last year and asked the department to provide a hold harmless or adjusted enrollment number when calculating state aid" but state law did not allow this.

"The department is required to use ADMs and calculations defined by the Legislature and has no discretion to use enrollments other than the actuals," she wrote.

Davis added that the numbers were estimates and those estimates would be finalized by the end of the year. She also warned that one-time grants for fiscal year 2021 would not be available for FY22.

Davis, through Grant Bosse, the public information officer for the education department, did not return a request for comment and clarification about the data.

Donchess said the city would be working "cost saving measures between now and June" but does not know if those strategies will be able to make up the $10 million in lost school revenue and downshifted pension costs.

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