About once a year, usually around budget time, various financial myths pop up around town. Here are three of the most common and the truth about each.
Myth 1: Ridgefield property taxes are among the highest in Connecticut.
A recent magazine article claimed Ridgefield has the eighth highest property taxes in Connecticut, which the author incorrectly calculated by multiplying mill rates times median home market values. In reality, actual mill rates are applied to assessed values, which average about 70% of market value. More importantly, by comparing dollars of taxes rather than rates of taxation, the article reflects differences in property values, more than differences in tax policies; few would say it’s unfair that a mansion receives a higher tax bill than a shack, if their tax rates are the same. The correct comparison, then, is the effective tax rate on market value (“Equalized Mill Rate”).
The truth is that in FY 2012 (most recent data), Ridgefield’s Equalized Mill Rate ranked 122nd out of 169 towns. This data is available on the Connecticut Office of Policy Management (OPM) website (ct.gov/opm), page C-18 of the 2008-12 report of Municipal Fiscal Indicators. In other words, Ridgefield’s effective property tax rate is lower than rates in 72% of Connecticut municipalities.
Myth 2: Ridgefield has one of the highest debt burdens of any town in the state.
While it is true that Ridgefield has a relatively high debt per capita, what is important is the town’s fiscal ability to carry its debt. From the OPM report (p. B-10) we see that there are at least 49 towns that carry more debt than Ridgefield as a percentage of the equalized grand list (the town’s taxable property). The credit rating agencies keep a close watch on a town’s debt. Ridgefield is one of only four towns in Connecticut to be rated AAA by all three major credit rating agencies. Last year Standard & Poor’s wrote, “The AAA rating reflects our opinion of the town’s … low-to-moderate debt burden with rapid principal amortization.” In other words, not only do we have a moderate amount of debt relative to property value, but we pay it off more quickly than most towns.
Myth 3: Ridgefield keeps an excessive “rainy day” fund balance.
Fiscal prudence (and credit rating agencies) requires that all towns set a certain amount of excess funds aside for a “rainy day.” The appropriate size of this fund balance is calculated as a percentage of town expenditures. As our first selectman showed in a recent budget hearing, Ridgefield’s current fund balance is slightly over 9% of proposed expenditures. This falls right in the middle of the 6.1% to 13.6% range for 10 towns in Fairfield County with at least one AAA rating.
We can all have different opinions about Ridgefield’s budget priorities, but let’s all start from the same set of facts.
Paul Sutherland is a member of the Ridgefield Board of Finance, and also a member of the Ridgefield Democratic Town Committee, which provides this column.