In budget-conscious times, town expenses are soaring
Mar. 8—A perfect storm of rising costs is battering town budgets statewide, according to the New Hampshire Municipal Association.
Persistent inflation, supply chain pressures, higher pay to attract workers, and a historic health insurance rate increase that many towns can't easily weather may shock voters at town meetings starting Tuesday.
In one year, the cost of employee health insurance has jumped 13% to 25% for most cities, towns and school districts across New Hampshire, said Kathleen Heck, government finance adviser at the municipal association.
"In other years we've seen rebates on insurances," which were substantial during COVID, she said. During that time, employees avoided routine checkups, laboratory tests, elective procedures and more — reducing the number and cost of health insurance claims.
Now, "We're paying for inflationary increases and pent-up demand," said David Caron, town administrator in Derry, where money in a collective bargaining trust will be tapped to offset a 12% health insurance hike.
In Bedford, "it's our largest health insurance increase" — 18% or $635,000 in one year, said Town Manager Rick Sawyer. More than a quarter of that will go to replenishing the municipal health insurance company account that covers upticks in claims and expenses, which is strictly regulated.
Londonderry is looking at spending $1.1 million more for employee health insurance — a spike of 19.3% in one year. The hike represents half of the total town budget increase, said Town Manager Michael Malaguti, and comes on the heels of a 14.1% jump in health insurance last year.
"When you have a double-digit increase, it does affect your bottom line," said Andre Garron, town manager in Hooksett, where the health insurance bill is rising by 11.3%, compared with 0.5% in 2023.
These are challenging times for municipalities fending off myriad fixed-cost increases while accommodating taxpayers whose wallets already are pinched. To appeal to voters, towns have made videos and podcasts to explain capital improvements and rising costs, and spoken to local residents and civic groups to garner support.
"Inflation was just a killer on general goods and services, the cost of construction, paper, electronics, you name it. Everything we use as a daily business entity has gone up, just as it happens at the grocery store. Our dollars don't go as far," said Todd Selig, town administrator in Durham, which approved its 2024 budget at the end of 2023.
Prices of police and fire vehicles have soared, and there's a longer wait for new equipment, administrators report.
Bedford expected to spend $600,000 for a replacement fire engine, after saving $400,000 for a new one. But a similar truck now costs $1 million — and won't arrive for three years, the town manager said. This means the town must allocate $600,000 instead of the $200,000 it planned.
Personnel costs
Routine cost-of-living increases of 1% to 2% are no longer enough to keep municipal employees on board, particularly those who work in police and highway departments, according to town administrators and the municipal association.
Raises of 3% to 7% are becoming necessary to attract and retain experienced employees, and significant sign-on bonuses are being offered in some places, according to reports.
The City of Lebanon is offering a $30,000 sign-on bonus for experienced police officers.
City Manager Shaun Mulholland, a retired Allenstown police chief, said that figure became necessary to fill open positions, pulling already-certified officers from Claremont and as far as Rhode Island after a smaller bonus did not lure any.
"Rotating shifts, holidays and weekends, a lot of people don't want to do that," Mulholland said. "That $30,000 we make up by not having to send them to the police academy."
Towns are paying significantly more for highway departments, including truck drivers and plowing contracts, according to the association.
In a state with unemployment hovering around 2%, towns face "a shortage of willing workers and we have to be competitive," said the municipal association's Heck, especially with fast-food chains starting new employees at $17 to $18 an hour.
Benefit adjustments
When it comes to employee health insurance, Amherst may have been lucky, said Dean Shankle, the town administrator.
In Amherst the price of health insurance for school employees is climbing by 23%. The bill for municipal employees is up roughly 6%, after unionized police officers agreed to a health insurance plan with a higher deductible and lower co-payments.
Amherst is the largest New Hampshire town that doesn't offer state employee retirement benefits. To join the state system, Amherst is adding $130,000 to the 2024-2025 budget, Shankle said, in order to remain competitive.
"You want people who have worked in other local town governments for 10 years," Shankle said. "But those people are going to go to other towns with New Hampshire retirement benefits. We've been looking for a town planner for over two years."
Litchfield, during this year's contract negotiations with police, switched health insurance plans, shaving $63,000 from a potential $85,000 increase, said Town Administrator Kimberly Kleiner. But she noted not all towns had a negotiations window to cut costs.
Bedford Town Manager Sawyer said new police officers have received sign-on bonuses for the last four years: $10,000 for certified officers and $5,000 for non-certified officers who require academy training. Still, there are seven openings in the Bedford Police Department. The public works department has four vacancies. There are no plans to increase bonuses, Sawyer said.
"Attracting people in a labor market with 2% unemployment is hard. Across the country, municipal jobs are going unfilled," he said.
Limited options
Fuel and utility costs are up $125,000 this year, said Derek Horne, Goffstown's chief administrator. Facility and fleet maintenance for the police, fire and public works department are $150,000 higher. The town is looking at a 12.8% increase in health insurance and a bump of 4.7% for dental — which add up to an additional $490,000.
Between 2015 and 2020, Goffstown's municipal expenses crept up 1% to 2% annually, Horne said. In 2021 and 2022, they vaulted by 11.5% and almost 15%. This year, the town's operating expenses are rising by roughly 9%, Horne said.
"For the last two to three years our operating budget has had to increase significantly, and has had to impact property taxes," said Horne. "On the expense side, we can explore cooperative buying. But it's hard to influence these costs a lot." If they continue to rise, "our selectmen may have to look at the services we're going to provide."
Outside of health insurance costs, Londonderry's biggest vendor price jump is for trash and recycling, which was buffeted by rising repair and maintenance costs, said Michael Malaguti, the town manager. This means a $460,000 increase for Londonderry.
"As shocking as some of these numbers are — nothing I've seen in my time with the town — everyone understands the unprecedented times we're living in. In order to maintain the services we're accustomed to, there isn't much we can do about these large increases," Malaguti said.
"If there's one piece of good news, as interest rates have gone up and stayed up, a lot of our increases have been offset by gains in investment performance," he said.
