Financing New Hampshire’s Cities and Towns: A New Data Tool

By Steve Norton and Dennis Delay

The New Hampshire Center for Public Policy Studies has undertaken a project to document trends in appropriations and tax rates for each city and town across the state. The genesis of this work started with requests from town budget officials asking the following questions:

“What’s my town’s tax rate compared to others of similar size and shape?"
“What happens to the tax rate if our revenue and appropriations change?"
“How do our appropriations compare to other towns providing similar services?"

Local governments, like the state and the counties, clearly need a tool that they can use to understand their own local appropriations, revenue, taxation and expenditures, in the context of recent trends and comparable communities. That tool does not currently exist.

To facilitate analysis of city and town financing, the Center has taken available data on spending for schools and other municipal services, local revenues, and local property tax rates and created a series of data templates, a number of which are described below. These templates are designed to begin to help New Hampshire cities and towns understand trends in their own communities and compare themselves to other municipalities along a number of different dimensions. Understanding whether a community is spending more or less on water treatment, emergency response forces, or heating oil than other communities can be an important piece of information as localities struggle to meet budget demands and look at alternative methods of providing services. Unfortunately, data at such a granular level—that is, at the city and town function level—is not available on a consistent basis across the state.

As questions regarding local government financing are most critical when town meetings or public meetings put a strain on local resources, a primary goal of the Center’s work in this area is to provide a tool that mitigates confusion around budget time concerning the meaning of trends and other comparisons. While we recognize that no single data source can answer all questions—reporting results is an art based on science, we believe the data tools we are developing will help inform policy makers and local citizens.

The Center expects to publish this research in the fall of 2007, and make the dataset available on its Web site,

Existing Data on Cities and Towns
Our work began with an analysis of the available data on taxes, expenditures and revenues for all the cities and towns in New Hampshire. While the larger municipalities produce a comprehensive annual financial report (CAFR), arguably the gold standard in local and state government’s efforts to track and understand revenues and expenditures, the smaller towns in the state do not. Audited financial statements are also inconsistently completed by towns and cities. As a result, the standard financial documents that might be used to analyze the finances of cities and towns are not comprehensively available.

The Department of Revenue Administration (DRA), however, collects a great deal of data, including tax rates, appropriations and revenues, for all cities and towns in the state. This data comes from a variety of different collection forms (including the MS-2, the MS-4 and the MS-24) submitted by local governments. DRA, as the final arbiter of local tax rates, annually publishes tax rates. Local governments are also required to submit to DRA information on local school appropriations, other municipal appropriations and revenues.

Although these data are consistently submitted and can be used to create historical trends on appropriations for school and other municipal and county activities, they do have some weaknesses. First, the data that is available on state government Web sites is not organized in a fashion that facilitates analysis or easy comparison across different localities and across different, but related, data. Second, the data that is available in a raw form is often not comparable across areas because of the variations in the characteristics of the towns themselves, including differences in property values, services offered and the number of people in the town. Comparing Manchester and Gilford on gross appropriations, for example, will be misleading unless you control for the significant differences in the size of the population of the two areas. Finally, there is some question as to the underlying consistency of what is being reported. The data reported to DRA are not currently linked with accounting standards and as a result, it is not always clear what is included within the various data elements being provided.

Despite its weaknesses, however, the data provided to DRA represent the most comprehensive source of information available on cities and towns in New Hampshire and it is this data that serves as the basis for the work that we are doing. For our analysis, we use the DRA Tax Rate Calculation for municipalities for the years 1999 to 2006. In addition, the Center database is supplemented with detail on local school appropriations (from the MS-24 form) and detail on monies coming from unreserved funds (from the MS-4 form). Finally, the Center added estimates of population by municipality from the Office of Energy and Planning to allow local areas to compare appropriations on a per capita basis.

The Center’s Data Templates
In the fall of 2007, the Center will be releasing a data book that provides data on municipal, local school and county appropriations and tax rates for every town in the state. Table 1 provides one of the templates that will be created. For each of the major functions (or in the case of the adequate education grants, revenues) the data will provide aggregate amounts for the years from 2001 through 2006, as well as information on aggregate changes over time and an annual compound percentage change.

In order to allow for comparisons across towns of different sizes, the data book will also include appropriations adjusted for the population of the town and changes in that population over time. Table 2 provides per capita measures for each of the major functions. Per capita school appropriations are based on the population of children less than 19 years of age. (The final templates may adjust total school appropriations by school enrollment counts rather than population less than 19.) The other measures are normalized based on the total population of all ages in the town. Looking at per capita measures will allow towns to assess how appropriations change over time, controlling for changes in the town’s population. In this hypothetical town, for example, growth in local school appropriations has increased significantly over time, much more quickly than per capita appropriations for other municipal services. County appropriations, on the other hand, have remained relatively constant. These per capita measures will also allow towns to compare themselves to other communities with similar services being offered.

In addition to the focus on appropriations, a series of measures will be provided showing information on local property tax rates and how they have changed over time. These indicators will include effective property tax rates for each of the major functions (municipal, school and county) as well as a set of indicators showing how potential changes in appropriation levels affect the property tax rates.

Steve Norton is the Executive Director and Dennis Delay the Deputy Director of the New Hampshire Center for Public Policy Studies. The Center is an independent, nonpartisan organization that pursues data-based research on public policy matters, develops options, informs policy makers and advises them about choices for action.

In addition to the data that the New Hampshire Center for Public Policy Studies will be publishing, the New Hampshire Public Finance Consortium has designed and developed a standard data model of fiscal indicators to help measure and trend the financial health of New Hampshire communities. The results of both the Center’s and the Consortium’s work will be presented on Thursday, November 8, 2007 at the LGC annual conference. For further information on the New Hampshire Public Finance Consortium, see the article, New Hampshire Public Finance Consortium: Fiscal Forecast Spurs Unique Partnership in the May 2007 issue of New Hampshire Town and City, also available on the LGC Web site at