By GARRY RAYNO, InDepthNH.org
CONCORD — A bill that would, once again, create “donor towns” under the Statewide Education Property Tax had a public hearing Tuesday before the House Ways and Means Committee.
House Bill 569 would require all communities in the state to send their statewide property tax revenue to the state Department of Revenue Administration to deposit the money into the Education Trust Fund.
Currently, property-wealthy communities that raise more money under the statewide property tax than required to cover the state’s adequate education grant to that community retain the excess funds.
The bill would also change the criteria for the low- and moderate-income-taxpayer-relief program and establish a study committee to study the tax relief program and how to expand it.
The bill’s prime sponsor, Rep. Richard Ames, D-Jaffrey, said the proposed legislation addresses concerns about the constitutionality of the current method allowing some communities to retain a portion of the tax while others do not.
He said the bill would return the original provisions to the statewide property tax and have the excess revenue sent to the state to help communities with lower property wealth.
Ames noted the change was made in 2011 to allow those communities that raised more than they needed to cover the adequate education grant to retain the extra money and most use it to reduce the local education property tax.
While no one opposed the bill at the public hearing, many of the communities that produce the excess revenue are fighting a lawsuit challenging the current system.
The plaintiffs, residential and commercial property owners in several towns, claim the SWEPT is unconstitutional as it creates lower rates for about 50 communities which results in the tax not being proportional or reasonable as the constitution requires.
The plaintiffs contend the SWEPT is unconstitutional both because of the excess money some communities retain and others pay no money under the SWEPT by having a negative tax rate.
The statewide tax raises $363 million annually, and provides about 30 percent of the state’s obligation for funding public education, while the majority of the money for public education comes from local property taxes with widely varying rates.
This fiscal year, the state used $100 million in surplus funds to reduce the SWEPT to $263 million, but also included an additional $15 million to reimburse the towns that generated surplus funds, but would not raise that money with the lesser obligation this fiscal year.
Ames said next fiscal year when cities and towns will need to raise the full $363 million, that will add an average of about $1.44 to the tax rate for communities.
His bill would also allow municipalities to retain 3 percent of what is collected for their fee and also to help the low-and-moderate-income tax relief program.
Ames said his bill would reform the tax relief program that was included in the state’s package more than two decades ago to address the Claremont lawsuit.
He said the program has not been updated and his bill would increase benefits and make it more attractive for homeowners who need help to apply and would also cover renters.
He noted the program has had fewer and fewer applicants over the years as the benefits are not worth the effort to apply.
But committee member Rep. Sallie Fellows, D-Holderness, said she had a bill approved in the 2021 session that increases the benefit to a high of $350 and there were more applications for the help.
Under Ames’s bill, the low-and-moderate tax relief program would raise the household income for families and single people, while decreasing the valuation of property under the program.
The bill would cap the program at $30 million, allow the homeowner to use both the local and state education taxes in its application for help and require the DRA to adjust the program to inflation yearly.
With the cap, Keen Wong of the Department of Revenue Administration, said his agency would have to wait until the last application is filed to determine if the claims are over the cap before payouts are made. If the total claims are under, everyone would receive a full benefit, but if they are over the cap, the approved applicants would receive a percentage of their claim.
“I believe there are a good set of numbers in that section,” Ames said about the tax relief proposal, “but there is always a better way to do it, so I’m flexible on that part of the bill.”
He said the study committee would determine if the application for the relief program could be made simpler, and more helpful to tenants and landlords.
“I would like to see it be more helpful to everybody,” Ames said, “and address our affordable housing problem.”
The bill was also backed by Zack Sheehan of the NH School Funding Fairness Project, saying “the bill specifically makes New Hampshire’s property tax system significantly fairer in our view.”
About $4 billion in property taxes are collected annually, he noted, which is significantly more than any other tax, yet it places a greater burden on low and moderate income property owners than wealthy ones.
“This bill advances taxpayer equity and ends the unfair provision wealthy towns enjoy now,” Sheehan said.
He noted in the current lawsuit, the state has not defended the constitutionality of the SWEPT, but instead argued against changing provisions in the middle of a tax year.
Committee chair Rep. Laurie Sanborn, R-Bedford, asked Ames if bringing the bill forward now is premature with litigation pending.
Should the legislature wait until the suit is settled before taking action, she wondered.
Ames said the legislature often decides to go one way or the other without waiting for a final ruling because it is the right thing to do.
“We could retain this and wait, but I prefer to see us go ahead,” Ames said, noting he would like to see more substantial relief for homeowners.
“I believe going forward now would give the legislature a good head start,” Ames said.
The committee did not make any immediate recommendations on the bill.
Garry Rayno may be reached at garry.rayno@yahoo.com.