Letter: Three Financial Challenges Facing Greenwich

lettertotheeditor

To the Editor,

Our town is facing numerous financial challenges and risks, three of which have grown significantly in recent years.

#1. Reduced Income and Wealth of our Residents

In the past couple of years, the combined earnings of our town’s residents have fallen meaningfully. According to the Internal Revenue Service, the adjusted gross income of all Greenwich residents dropped 8.0% to $12.5 billion in 2016 (the most recent year the IRS data are available) from $13.6 billion in 2015, after declining 8.5% from $14.9 billion in 2014. 

Although some of the decline in earnings might be due to our still-current residents who have moved their tax domicile out-of-state, there is no doubt that the continuing financial challenges of the State have discouraged people, jobs and capital from either remaining or moving here.  Add to this a significant regional contraction of the financial services industry, in which many of our residents either have or had careers.

Our property values for similar reasons have s declined. For most families, their home represents the major portion of their wealth. Last year, the total assessed value of residential property in Greenwich of $26.22 billion still remained slightly lower than the $26.62 billion assessment a decade earlier immediately following the 2008 recession. If the value of renovations and new construction is excluded, the percentage decline in assessments would be much greater. Next year, as required every five years, the town will reassess all properties, and many expect continued material decline and shifts in value.

#2. Higher Cost of Town Government

The cost of our local government is high and continues to grow at rates above inflation.

Although the mill rate of Greenwich is the second lowest among all Connecticut municipalities, the average property tax per capita of approximately $6,000 approximately places Greenwich close to the highest in the State.

For the decade ended 2018, our town’s property taxes – to fund the town’s operations as well as healthcare, debt service and other expenses – grew 37%, from $267.11 million to $385.49 million.  That equates to an annual compounded growth rate of 3.7%. By comparison, the annual growth in the U.S. Consumer Price Index over the same period was half as much at 1.6%. Although the higher cost of local government affects all residents, it is clear that higher costs especially affect the many residents who are living on ‘fixed’ incomes.

The largest part of our town’s budget is the cost of employee wages and benefits, which the town negotiates with the various town unions through collective bargaining.  When the town and a union cannot agree to contractual terms (as often happens), a State arbitration panel will decide on the terms of the contract, primarily considering Greenwich’s ‘ability to pay.’ This is not helpful for limiting the growth of labor costs.

The funding requirements of the State have also added directly to the financial challenges of Greenwich.  Since it last increased the maximum income tax rate to 6.99% in 2015, the State has the reduced its grants and PILOT payments to Greenwich, expanded the sales tax and other non-income taxes, and continues to consider the allocation to Greenwich for payment of its share of the State’s considerable pension expense.

#3. Potential Recession

There are increasing signs the current U.S. economic expansion – which began after the recession of 2008 and has just became the longest U.S. expansion on record – may be ending. 

An economic recession would further reduce the ability of residents to afford the range of town services we currently enjoy and to support the many local non-profits that contribute so much to the town.

Why are these three factors important? Those that live here know that our town provides many exceptional services.  But, in the years to come, given our declining incomes and the rising cost of town services, those serving in town government will need to distinguish between services that are necessary for the well-being of our residents and those services that are merely ‘nice-to-have.’ Without a critical review of our town programs, we will be facing larger tax increases, something many residents cannot afford.

There are fiscal challenges ahead in the next few years that will require not only our town’s political leadership, but all voters, to be smart and sensible about how our town’s resources are allocated. Your Republican candidates for the Board of Estimate and Taxation (the “BET”) will be fighting to make sure that all allocations will benefit all residents and ask that your support our team as tough budget choices are made later this fiscal year.

By Bill Drake, Andy Duus, Karen Fassuliotis, Debra Hess, Mike Mason and Leslie Tarkington; Republican BET Members and Candidates for Re-election to the BET

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