Towns and Taxes: Growing Dilemma

By Neal Peirce and Curtis Johnson

What’s the problem with New England towns? Why are they so tempted to spurn planning and approve strip malls, big boxes, oversized houses on big lots, even when their population is static? And why are they perennially so short on money?

Three reasons stick out. Most towns are small – scaled for the 18th, not the 21st century. Their governments are often part-time, with public spirited but untrained officials, ill-equipped to face raw market pressures. Without economies of scale, they’re expensive. And they’re dangerously reliant on property taxes.

New England towns range from 22 square miles average in Massachusetts to 35 to 40 miles in northern New England – dramatically smaller than typical town or county sizes across most of the U.S.

Until World War II, the diminutive size was OK for townspeople to work, shop and govern themselves. But no longer, notes Evan Richert of the University of Southern Maine’s Muskie School of Public Service: the old town and school district boundaries are out of whack today; they fail “to match the flow of people, energy, water, cars, wildlife, dollars, or just about anything that moves.”

Supposedly, most New England towns enjoy major “home rule” powers. But in fact, there’s little they can do to control of waves of suburban expansion or the impacts of retailing and housing decisions in just-next-door towns. State legislatures burden them with rafts of meddlesome regulations. The forces rushing over towns are so strong, Richert suggests, that “home rule is increasingly an illusion.”

New England’s historic town meetings have immense appeal. In an age of slickly commercialized and manipulated political messaging, they stand out as beacons of self-determination, civility, frugality, accessibility.

But if the towns are so small they must rely on volunteer, untrained officials to run operations, deal with developers, negotiate with complex state bureaucracies, how well served are they in fact? Sheer numbers of local governments suggest the complexity: Massachusetts 351, Connecticut 169, Vermont 284, Rhode Island 39, New Hampshire 234, and Maine as astounding 489.

Plus, the New England governance scheme – and mindset – creates a rough setting. Hartford economic development specialist Mark Waterhouse refers to the “swamp Yankee – the fellow who believes all decisions should be made locally, which means ‘at my house.” Yale University’s preeminent expert in urban governance, Douglas Rae, describes it as “old politics, old infrastructure, fragmentation, resistance to change, and gnarly state politics in most cases.”

If the issue is joint purchasing of supplies, there are more inter-town accords, advances across New England, than most people recognize, and they are models of win-win inter-town collaboration. One example: the Boston area’s Metropolitan Area Planning Commission has engaged 36 municipalities in collective purchasing, bidding out more than $20 million in contracts in the past two years, saving participants some $2 million.

Still, splintered local government and its property tax reliance pose real problems. The idea that the 169 communities in a state like Connecticut are independent, self-sufficient entities is “pure myth,” notes business leader Richard Maine: “Based on the property tax, there’s no way they can support separate school systems, fire departments or other services. Except maybe for Greenwich, they all have to run to the state to finance themselves.”

And then there’s the sheer cost of today’s sprawling development. New residents in once quiet, outlying towns typically start demanding a town manager, more police and professionalized services. They want new facilities, from public safety buildings to expanded water and sewer systems to new roads to serve the spread-out development. So do people in the next town or city over. So what’s the result? Immense duplication, dramatically rising maintenance costs, inflated cost of government, and little accountability for the full regional costs. Example: When Maine officials under former Gov. Angus King drew a 20-mile circle around Augusta, they found 91 fire trucks serving 95,000 people. Not one of the monster trucks – priced from $100,000-$500,000 and up – was jointly owned.

Hit by rising costs, the towns end up competing furiously for property taxes and commercial development. “We pay due respect to local control but it comes at a high cost,” says King, citing not just costs of town governments, but schools as well: “We have 198,000 school kids in 265 school districts, each with its own superintendent, curriculum, purchasing office – about one superintendent for each 750 kids.”

The competing values of fiercely guarded home rule and Yankee love of frugal government are rubbing together like tectonic plates – in “full collision,” says John Baldacci, Maine’s present governor.

Pressures are building in all New England states. But Maine, with the nation’s highest state-local tax burden related to personal income, seems a step ahead. It’s not only begun to put caps on local spending but inaugurated a “regionalization” program of cash incentives for localities that agree to curb local tax rates through systems of shared services between towns or school districts. “It’s going to be collaborate or collapse,” says University of Southern Maine economist Charles Colgan.

Can cost constraint, accountability, a generation of shared services, flourish across New England’s cities and towns? Without state government leadership, the answer’s almost surely “no.” State governments need to pierce the veil of each town or school district’s bookkeeping and then make a serious demand: “We need to know how you’re spending money – precise details, service by service, year by year. Understandable and comparable numbers – real transparency – that’s our price for continued support.”

With that data, citizens, the media, governors and legislators will be able to make accurate comparisons of performance for individual town and school districts. The costs of inefficiently scaled services, the potential benefits of service mergers, will become apparent – helped along by analyses by state agencies, the media, universities and public policy groups. It will become much easier to press for radically increased collaboration and budget economies.

Fortuitously, data comparison has been made infinitely easier by recent years’ rapid advances in digitized data processing and Internet dissemination. And New England has all the information technology expertise it needs to make it work.

Patrick McGuigan is one of the major advocates. He heads the Providence Plan, a joint city-state-academic effort that’s built up a “data warehouse” on people, public education, health and property to help government and citizens discuss ideas and develop new strategies one every front from crime control to housing. His kind of tools, applied New England-wide, could open eyes to new ways to provide and combine services.

A particularly powerful tool, says McGuigan, is GIS (geographic information services). Through it, he says, one can show the impacts, town-by-town and regionally, of different development and land use decisions: “Seeing is believing. And we’re completely in a visual age. GIS is all about telling stories through pictures, maps, data. It can show scenarios, choices.”

Take for example the kind of small-town growth dilemma described to us by Pat Moulton Powden, chair of the Vermont Environmental Board. The issue: how to balance the preservation of forest canopy and open space against the pressure of newcomers who want to build big on multi-acre parcels. Is there an alternative in more community-centered development? GIS-based analysis – especially software like the CommunityViz program developed by the Orton Family Foundation – can compare impacts of the varying scenarios on the build-out of the town, open spaces, public utilities, roads and taxes. Disagreements may persevere, but decisions can be far better informed.

If better fiscal and land use information systems can develop, what’s still missing for New England? Two essential steps, we’d suggest: finding ways for towns to coalesce regionally, and clipping the wings of the property tax.

Coalescing regionally. New England town government is still relevant – “Anyone who plows your street, collects your trash, puts out your fires, teaches your children, patrols your neighborhood and taxes your home is relevant,” notes Evan Richert. But, he adds, “relevant” is not the same thing as “control” – bigger-than-the-town forces with dramatic impacts on taxes, the local economy, and critical regional land use decisions.

So how do the citizens of a region gain some control – control of the big land use issues, power to allocate taxes and services, ability to make government more efficient – while leaving New England’s icon, their towns, intact?

Maine’s Gov. Baldacci favors a “municipal service district” model developed by Richert at the University of Southern Maine’s Environmental Science Center. Towns would be encouraged to gather, voluntarily, into groups of five or more that contain two or school districts, a population of at least 20,000, and an area of at least 250 square miles. They’d be offered a big carrot for making the leap: the state assuming their town and school district general obligation debt, and a 10 percent bonus in school aid. There’d be a corresponding stick for towns that say no: a parallel 10 reduction in their school aid, and no help on debt.

With those big financial inducements, municipalities would be able – but not forced – to come together, preparing a charter for adoption in a referendum. Their new district would exercise, through an elected council, three basic powers: setting a budget, setting the tax rate, and development planning. There’d also be a popularly elected school board. The towns would continue as legal entities, submit yearly budget requests to the service district, be free to keep their town meetings, and run such local services as traffic control and animal control. But the major fiscal and land use decisions would get the more regional approach they demand.

In Vermont, former State Sen. John McLaughry of the Ethan Allen Institute advanced a parallel idea: merging the state’s 244 towns into 40 “shire republics” of roughly 15,000 people each. Why? To return more decision-making from the state to local hands. But the idea, says McLaughry, has proven “too big a leap” for his fellow conservatives, because they’re still wed to the idea of the town, however small.

Perhaps some variant of the Maine idea, precisely because it maintains the town identity and allows regional governance by democratic choice from the bottom up, will catch on. Business groups tend to like it; the lobbying organizations for towns object strenuously. But if any idea’s time has come, this is it.

Clip the property tax. High property taxes – the burdens and perverse incentives they create, the rage they generate, the town-to-town school funding inequities they proliferate, the barrier to affordable housing they pose – represent an endless New England nightmare, even if somewhat relieved by state action (especially in Massachusetts and Vermont) to take over more school funding responsibility.

Anxious to up their property tax receipts, towns typically zone for an acre or more per house, expecting higher valued homes with less children, rather than encouraging higher density projects. Middle income workers – teachers, fire-fighters, police officers and others – are increasingly locked out of the housing market. The crux of the problem, says demographer Peter Francese: “All the costs of building affordable housing fall on small municipalities while all the benefits accrue to the entire region.”

Or in the words of New Hampshire broadcaster Arne Arneson: “All six states rank in the top 10 nationally in per capita property taxes. That’s your source of dollars. Why share those dollars? Why give them up? The dependence on local taxes has made us unwilling to embrace a state approach, let alone a regional approach.”

No one claims there’s a quick solution, and all revenue alternatives have their own warts. But just check the U.S. Census figures: on average nationally, property taxes represent just 20 percent of total state and local government revenues. So by what reasoning do they and their pain need to constitute 26 percent of state-local revenues in Massachusetts, 30 percent in Vermont and Rhode Island, 31 percent in Maine, 32 percent in Connecticut, 42 percent in New Hampshire?

(Source: U.S. Census Bureau for 2001-02)

To outsiders looking in, the smart New England move would be to move all states’ average to the 20 percent national figure. Increased income taxes and sales taxes (especially on the fast-growing, lightly taxed service sector) could fill the gap. New Englanders may need to be reminded: change is legal.

[Originally published January 2006]

Photo Credit:

Burlington, Vermont Town Hall.