On March 10, the voters of Lebanon will be asked to weigh in on a proposed City Charter Amendment brought forward by petitioners to establish a cap on City tax increases. As mayor, I recommend you vote no.
Lebanon residents want property taxes to be predictable and affordable and I share that goal. The City Council’s long-term budgeting decisions reflect a consistent effort to balance taxpayer impacts with essential services and infrastructure.
The question on the ballot, however, is not whether spending discipline matters – it does. The question is whether this proposed charter amendment is the right tool. After reviewing the proposal and its likely impacts, I recommend a “No” vote. The cap uses an inappropriate inflation measure, does not reflect Lebanon’s growth and service demands, and risks unintended consequences for service reliability and infrastructure.
The proposal uses a rolling three-year average of the Consumer Price Index for All Urban Consumers (CPI-U). CPI-U is designed to reflect household consumer spending, not municipal spending. Our largest cost drivers are typically wages and benefits, insurance, construction materials, contracted services, and regulatory requirements, which often rise differently than CPI-U. As a comparison, the NH Department of Transportation’s construction index has increased over 52% in the last three years, well above the 8.9% CPI-U. When municipal costs rise faster than CPI-U, this cap won’t simply hold the line, it can force difficult tradeoffs such as budget reductions to roads and sidewalks, equipment replacement, and services that residents value and depend on.
This tradeoff has occurred in communities with tax caps in place, where the need to maintain services results in limitations to infrastructure and equipment budgets. Lebanon is growing, as is demand for police and fire coverage, winter plowing, emergency response, and day-to-day DPW operations. However, the proposal does not allow for increases due to growth in taxable properties, but instead rigidly ties budget growth only to the prior year’s budget. This can mean an effective reduction in service and reliability, even as the City is trying to keep up with current service expectations and can impact all areas of the City.
The tax cap also may not actually provide significant savings to taxpayers. When you remove the effects of the State-mandated property revaluations, a taxpayer with a $400,000 home would only have saved $43.28 per year under the tax cap since 2020. However, the overall impact to the budget would significantly impact the residents of Lebanon through reduced services, far more than what an individual taxpayer would save.
Why is that? Since 2020, the City’s average annual increase has only been 4.1% while the CPI-U has averaged 3.8%. The biggest driver of residential taxpayer increases actually comes from the State’s required revaluation process, which the proposed cap cannot change.
Unfortunately though, under a charter tax cap, the City could experience a ratchet effect, which is one of the least understood risks of these caps. When future increases depend on the current year, budgeting below the cap makes catching up later much harder—especially as deferred needs accumulate and become more expensive. As a result, budgets tend to always increase at the tax cap rate, even when City leaders would otherwise request less. This isn’t what the Council wants, but could be necessary for responsible, long-term financial planning and to maintain the City’s infrastructure.
Without a tax cap, however, the City has flexibility to limit growth in the City budget to reflect the City’s needs at that time. The Council has done this before, such as in 2021, 2022, and 2026. In 2021 to 2022 combined, the CPI-U rose 14.9% over those two years, but the City tax increase was only 5.8% over that same time. For 2026, while inflation is currently expected to be about 3%, the approved tax increase is 0.7%. Such budgeting approaches show why flexibility matters. A rigid CPI-based formula reduces the City’s ability to make those kinds of responsible, year-specific decisions.
I understand the appeal of a tax cap. However, this proposal oversimplifies a complex responsibility and risks long-term impacts to infrastructure and services for limited savings and without sufficient consideration of available information. For these reasons, I recommend a “No” vote on the proposed tax cap charter amendment.