In the February 19 edition of The Cricket, William Shipman wrote that Manchester is one of the most expensive towns in the Commonwealth as measured by per capita spending. Robert Beatty followed up with the argument that spending per capita is not a meaningful measure for evaluating Manchester’s cost of living, saying this method does not “statistically control” for all sorts of different factors. Instead, Mr. Beatty suggests that real property taxes are a better measure. Is Beatty on to something?
The cost of any town government is the total spending incurred by that town. This is true irrespective of how costs are financed—whether by taxes, user fees, debt or transfers from the state or federal government.
Given that towns spend significantly different amounts—say, Boston compared to Manchester—comparing costs at the individual level requires adjusting costs to the population. Boston spends more, but the tab is shared by a larger population. Not adjusting costs for population would be illogical.
Beatty’s preferred method does not adjust for population. Rather it is a measure of spending relative to real estate values, or the “Mil rate.” The Mil rate is calculated by dividing net spending by total assessed property values and multiplying that number by $1,000. For instance, if a town spends $100, and its real estate is valued at $10,000 its tax rate is one percent, and its Mil rate is $10 per $1,000 assessed value.
This is a useful metric in comparing the cost of government within a town, homeowner to homeowner. Let’s say the tax (the Mil rate) is $10.99 per $1,000 valuation (Manchester’s case), and you own a house valued at $1,000,000. You pay $10,990 in real estate taxes. Your neighbor, whose house is valued at $775,000 pays $8,517.25. If the next year town spending stayed the same, and assessed values doubled, your real estate tax would stay the same even though the tax per $1,000 assessed value would fall in half.
The Mil rate is highly sensitive to assessed values. Indeed, any year in which assessed values increase more than spending the Mil rate falls even though spending rises. The Mil rate does not reflect population, and, therefore, is improper to use in comparing per capita costs from one town to another.
This is the interesting part. From the table below from 2020 to 2021 the Manchester Tax Levy increased from $29.36 million to $29.57 million, a 0.74 percent increase. It is not much of an increase but nevertheless an increase. Manchester Property Values also increased, from $2.51 billion to $2.69 billion a significant 7.24 percent increase. Because of the major 7.24 percent increase in property values and the minor increase in the Tax Levy, the Mil Rate actually decreased from 11.70 to 10.99 a significant 6.07 percent decline.
Although the Mil Rate declined significantly, as reported in the Manchester Assessor’s “FY2021 Tax Rate Has Been Approved” report, the average tax bill increased by $48.55. Although this is a small increase, it is not a decrease as the decline in the Mil might suggest.
However, this is not the end of the story. The Tax Levy equals Total Expenditures less other sources of funding. This is expressed as the Tax Levy as percentage of Total Expenditures. Generally this percentage seems to be fairly stiff with the Tax Levy running 92 percent – 93 percent of Expenditures, a one percentage point range (see table below last column).
In 2021 the Tax Levy percentage of Total Expenditures did not follow the recent trend. From the table below for 2021 this percentage was 88.13 percent, a significant departure from the average.
Manchester’s Total Expenditures increased from $31.6 million in 2020 to $33.6 million in 2021, a significant 6.07 percent increase in Total Expenditures.
As a result, there is a dramatic 12.1 percent difference between the change in Mil Rate (-6.07%) and the change in Total Expenditures (+6.07%). In fact, this year the two seem to be totally disconnected.
Manchester Taxes, Property Values & Expenditures
Tax Levy %
Note: FY 2021 is Total Budget excluding Enterprise and CPA,
Source: Massachusetts Department of Revenue, Municipal Data Bank, Division of Local Services
Mil Rate is a convenient framework for assessing individual property taxes but little else. In the long run taxes (not rates) will revert to mean to reflect Manchester’s annual Expenditure and Expenditure growth. From 2003 to 2021 Total Expenditures have increased by 4.0 percent annually. Unless something changes this is the long-term rate that homeowners can expect their taxes to increase (ignoring differential rates of property value increases).
A 4 percent annual increase in expenditures will cause taxes to double in 17.7 years, at 6 percent 11.9 years and 2.5 percent it will take 28.1 years.
Of the three inputs that comprise the Mil Rate, the only item that the town of Manchester can control is Expenditure(s). Property Values and other Funding Sources cannot be consistently managed to control taxes. As Mr. Beatty states “we must keep an eye on spending”. In order to do this, we should create a framework, a set of expectations and measurement metrics by department. We could then measure out performance versus spending and compare it to departments of other similarly sized and situated towns. This could be the foundation to assess whether, as Mr. Beatty states, we are “doing a good job,” now and in the future.
As Mr. Shipman suggests, perhaps we should create an elected board, independent of the Board of Selectmen, whose sole purpose is to hire and monitor an independent outside consultant that would establish a framework, evaluate Manchester departmental spending including a comparison to similarly situated towns.
David Page has been a resident of Manchester for 33 years.