Every year the Town of Thetford and the Thetford School District undertake the process of drafting their annual budgets. These budgets undergo scrutiny and approval at Town Meeting, ultimately determining property tax rates for the year. This year's budget discussions are particularly noteworthy due to specific factors at play.
Recent coverage in the January Valley News article discussing Norwich's looming "tax bomb" also mentioned Thetford. According to a state report, there is a potential for a 26.5% increase in Thetford's education property taxes, a figure that is comparatively lower than Norwich's estimated 32.2% increase. The basis for this difference lies in the State's examination of the weighting system for students. A new approach grants additional weight to students facing poverty. The added weight results in increased funding. It's noteworthy that Thetford boasts one of Vermont's lowest percentages of students living in poverty, ranked fourth in the state at 9.7% as opposed to Norwich's 1.86%, ranked first.
The collective weight of students within a district is used to determine the number of "equalized pupils" which, in turn, influences the calculation of education taxes for the district. Fewer equalized pupils correlate with higher taxes. Consequently, the proposed increase in weight for students experiencing poverty is expected to reduce the total number of equalized pupils in Thetford relative to other districts. By a complex system of Education Department formulae, this will result in an increase in Thetford’s education taxes.
In surrounding towns, Strafford has 26.92% of students living in poverty, Sharon has 34.17%, and the Rivendell Interstate School District encompassing Fairlee, West Fairlee, and Vershire has 44.82%. These districts anticipate a decrease in education taxes.
A legislative proposal is currently under consideration, suggesting an annual cap of 5% on education property tax increases. This would imply a phased-in increase for Thetford, commencing in 2024. It is essential to emphasize that this proposal remains pending and has not yet been enacted.
Another concern for Thetford residents is a town-wide reassessment of property values as reported by Li Shen in July of this year. Typically, when a property's assessment increases, so does its property tax liability. However, an individual property's tax burden is relative to its value within the town's total property value (the Grand List). If all property values are increasing proportionally, most property owners should not experience significant property tax hikes, although some may see adjustments.
The primary factor influencing property taxes for all residents is increased spending. As reported by Li Shen in August, the Selectboard is considering the addition of a municipal social worker position in Thetford. The Town Manager estimates that this could lead to a $100 increase in municipal property taxes for every $200,000 of assessed property value. This does not take into account potential added costs, like gas mileage if they travel to see clients or contracting for clinical supervision, if necessary. Some argue against this proposal, highlighting Thetford's relatively low poverty rate. Moreover, Thetford has already increased its appropriations to area social services organizations to $44,504, a 12.66% rise from 2022 (as per Page 62, 2022 Town Report). These funds benefit Thetford residents who receive services as well as the broader region. Service organizations are able to request funding increases when the budget is being prepared or even at Town Meetings.
Vermont is facing another year of substantial increases in healthcare costs (up to 14% over last year), which will increase the cost of labor and may raise town and school budgets.
There are also discussions about expanding the Thetford Recreation Department in 2024.
In addition, Thetford faces a substantial road maintenance deficit amounting to millions of dollars, as documented by a road assessment conducted two years ago. While some work has begun, the estimated cost for Tucker Hill Road alone exceeds $3.3 million, a project comparable in size to the Phase II rebuild of Route 132 from the Norwich town line to the Tucker Hill Road intersection, before accounting for inflation. Meanwhile, the annual allocation to the municipal Paving Fund, a capital planning fund for significant projects, remains at $125,000, a figure that has not seen an increase despite inflation. At this rate, it would take over 26 years to accumulate sufficient funds for just the Tucker Hill Road reconstruction, not factoring in inflation or other projects. It is worth noting that the recent Route 132 rebuild, completed two years ago, was built with an estimated service life of only 15 years, and the 15-year bond that funded it essentially prevents Thetford from taking on any additional road construction debt.
In a conflict of priorities, the Town allocated $50,000 in the 2021 budget from the previous year's Public Works budget surplus to artificially lower the tax rate. In the 2022 budget, that liability was expanded to $60,000. The Town will have to match that $60,000 from either 2023's surplus, assuming a sufficient surplus exists, or by raising new taxes in 2024. The liability will exist until new taxes are raised, making the practice more of a tax rate increase deferral rather than a “tax rate buy down.” The liability will come forcibly due in any year a surplus doesn’t exist, such as from unusual weather events resulting in road damage and substantial unbudgeted Public Works expenses.
Conversely, if a $50,000 budget surplus were deposited into the Paving Fund year over year, there would be no liability, no new taxes would need to be raised, and Tucker Hill Road's reconstruction could be fully funded over seven years sooner than currently projected, before accounting for inflation. In fact, such liabilities had reached zero in both the Public Works and General Fund by 2021 after a two-year effort to lower these liabilities from a high of $155,000 in 2019. The intent at the time, which was not carried forward, was to direct future Public Works budget surpluses to roads rather than tax deferral, which burdens future taxpayers and leaves the town financially exposed to climate change.
All these factors and more are at play in this year’s budget considerations. However, if property taxes should increase substantially, either education or municipal, there is some reprieve. Vermont offers property tax credits for qualifying homesteaders to mitigate property tax increases, while renters have access to the renter credit. However, these programs are not foolproof, and increased property taxes can impact housing costs in various ways, potentially making housing less affordable and more scarce. Ironically, a lack of housing for lower-income families could be a contributing factor to Thetford's looming education tax bomb given the State's new weighting system.
Census data indicates that only 6.2% of Thetford residents are living below the poverty line, a figure lower than the 9.7% of Thetford students facing poverty. Whether Thetford residents can comfortably absorb substantial property tax increases is a matter to be decided by residents' participation in the next Town Meeting and the discretion of local officials tasked with crafting reasonable yet effective budgets.