Which towns can actually afford their public services?

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Nearly 60 percent of Connecticut’s residents live in towns that do not have enough revenue to cover the cost of services.

The Connecticut Data Collaborative recently released an analysis of the fiscal situation of municipalities. That analysis expanded upon a report to the General Assembly’s Program Review and Investigations Committee prepared by the Federal Reserve Bank of Boston’s New England Public Policy Center (NEPPC).

A municipality’s revenue capacity is defined as a standard mill rate multiplied by the equalized net grand list of a community.

According to the Data Collaborative report, 78 towns in the state have a gap between revenue capacity and what the NEPPC calculated as the cost of their services. The NEPPC study only looked at non-educational costs.

The rest of the towns have the capacity to raise revenue greater than the cost of services. Those towns are primarily in Fairfield County, Litchfield County and the shoreline.

According to an analysis from the NEPPC, there are five cost factors strongly related to non-school per-capita spending levels:

  • Unemployment rate: Towns with a higher unemployment rate must spend more on public safety and public works because the crime rate tends to increase with the unemployment rate, and the unemployed are more likely to rely on public assistance for transportation, health and welfare.
  • Population density: Denser populations tend to increase the cost of fire protection. Denser housing presents a greater fire hazard than housing that is spread out.
  • Private-sector wage index: Governments may need to pay more to attract municipal workers where private-sector wages are higher.
  • Town maintenance road mileage
  • Jobs per capita: A higher number indicates a greater number of out-of-town commuters who use more municipal services, such as roads and public safety.

Fiscal disparities occur when economic resources and public service needs are unevenly distributed across localities.

The highest costs tend to be in southwestern Connecticut and in and around Hartford.

The urban areas in Connecticut have the highest per capita costs because of high unemployment rates, dense populations, and a large number of commuters from out of town who drive up the cost of services.

The collaborative noted that property tax revenue capacity has been on the decline since at least 2011.

Overall, the Equalized Net Grand List has declined for 145 out of 169 towns since 2011, and raising revenue has become increasingly difficult for towns.

Visit ctdata.org to examine the methodology of analyzing fiscal disparity, how a town’s costs and revenue capacity are measured, and which towns have improved since the report was released.

What do you think?

  • Don Gonsalves

    As a senior financial individual and very active in the financial situation in my town of South Windsor I do not understand what he is saying. When there is a gap, all they do year after year is increase the mill rate to eliminate the gap. We are in the middle of budget discussions for next fiscal year and they are simply increasing the mill rate by 2.63% to obtain the required income to balance the budget. Don Gonsalves

    • Andrew Ba Tran

      Hi Don, I’ve tried to update the story to make it clearer. The NEPPC and the Data Collaborative were using “revenue capacity” — defined as a standard mill rate x the equalized net grand list of a community — as opposed to actual “revenue”, as a measure of the ability of a town to pay for services (and note that the cost of services is defined as a calculated cost of services that a town would in theory have to pay for based on the five measures used by NEPPC — again not the actual cost of providing services in the town.) Also the NEPPC study only looked at non-educational costs.

      I just summarized some parts of their report, but visit http://ctdata.org/news/2016/03/11/fiscal-situation-of-our-municipalities/ for a better look at the details.

  • Joseph Brzezinski

    What is this NEPPC and subsequent follow up NEPPC stories leading to? It is logical to infer, the state which probably requested the study and/or paid for will use it as a base to modify or increase levels of state grants to towns as property tax relief. In essense, the towns with excess capacity will see it as a ruse to transfer their capacity to those with gaps. The towns with gaps will welcome the funding but not the inevitable state mandates to receive them. However, what incentives will exist for those towns to become self sufficient without state funding rather than growing higher levels of dependency?
    Maybe the towns need legal means of raising revenue other than by property taxes alone without state interference….