Proposed Newport 2016 Budget Calls for 2.06 percent Tax Increase

The first draft of Newport’s budget for fiscal 2016 released this week calls for a tax increase of 2.06 percent.

The resulting property tax would be $10.73 per $1,000 of assessed value for residential properties and $14.87 for commercial, increases of 2 and 1.99 percent respectively.

The total spending plan is $124.45 million, an increase of 2.03 percent over last year and is driven by increasing costs, flat investment income and an ever-increasing school budget deficit that shows no signs of abating.

In his budget message, Acting City Manager Joseph Nicholson described the city’s budget picture in bleak terms: limited revenue opportunities, an existing heavy reliance on local property taxes, less state revenue sharing, fixed increases in union contracts, rotting infrastructure and relentless cost increases in employee benefits.

The elephant in the room is the school budget deficit, which is estimated to be about $1.2 million or more this year and will steadily increase every year, according to projections. By 2019, it is expected to be at $2.8 million and nearly $5.5 million by 2029 if the underlying structural problem isn’t fixed.

“The City Council and administration will need to continue to work with the elected School Committee members and the School administration to meet the needs of the community and schoolchildren while balancing the costs to the taxpayers,” Nicholson said. “One of the major outliers is that of retiree benefit costs. Newport is spending $1,816 per pupil for retiree benefits, while Middletown and Portsmouth spend $152 and $225 per pupil, respectively. Contract negotiations and negotiations with current retirees are on-going in an attempt to reduce these costs. The potential for deficits in the School system needs to be regularly monitored in the foreseeable future.”

The budget, along with fixed cost increases, does provide some investment in infrastructure. $1.4 million in capital funding will be used for road and sidewalk improvements and the road repair budget is maintained at $840,000. Those figures don’t include already-activtated bond funds for other road improvements, such as the Broadway streetscape project that just started.

The budget also includes a call to create a full time communications director position to take over responsibilities scattered across all city departments in disseminating information to the public, maintaining social media accounts and other communication jobs.

General fund revenues are expected to increase by $2.2 million over the next two years, though the city is expecting a one-time hit from the Volvo Ocean Race which will decrease meal and beverage tax revenues by $200,000 this year. The total combined revenue for fiscal 2016 is $129.3 million. It is expected to reach $132.9 in fiscal 2017.

Slot revenue has continued to decrease, though Nicholson said he expects it to stabilize at the current level.

The city’s appropriation to the school district will be $23.8 million next year, an increase of 2.07 percent.

Nicholson said the underlying economic assumptions in this budget are:

• The housing market will slowly improve. The City has seen an increase in building pennits which is expected to continue.
• The economy will continue to improve. The upcoming tourist seasons are scheduled to be less active than the prior year’s due to the one-time Volvo event in Spring 2015. This will result in a decrease in revenues including hotel tax and meals and beverage taxes
• Stable interest rates are expected over the next fiscal year, leading to flat investment income.
• The state continues to struggle financially and this may negatively impact local and school funding.
• Newport Grand continued to experience decreased revenues, but we expect it to stabilize at the current leve
• Increasing costs of 3-4 % will impact city purchases of supplies, materials, contracts and utilities.
• Notice from Blue Cross Blue Shield indicates that health insurance rates in the budget will remain the same in FY2016 and increase approximately 3.0% for FY2017
• Property and liability insurance claims impact rates due to storms. The City anticipates a 10% increase due to damage of property and vehicles.
• Historically low bond interest rates will allow the City to continue to borrow against its AA+ credit rating at low interest rates.

The budget now is in the hands of the Newport City Council, which will begin public hearings during its regular City Council meetings on May 13, May 27 and June 10. If necessary, it can hold an extra meeting on June 24.

Review the budget HERE.