Council Tells NH Delegation City Wants More Rooms and Meals Tax Money

City Councilors told Portsmouth state representatives the city needs to receive more rooms and meals tax revenue and a greater subsidy to offset the rising pension costs for the state retirement system.

Several councilors, City Manager John Bohenko, Portsmouth Schools Superintendent Edward McDonough and Public Works Director Dave Allen met with state represenatives Terie Norelli, Laura Pantelakos, Rebecca Emerson-Brown, Brian Wazlaw and Gerald Ward, all Portsmouth Democrats, on Friday at City Hall to discuss some of the issues they want to see addressed in Concord.

Bohenko said the amount of money the city receives for its portion of state rooms and meals tax revenue is high on that list.

According to information provided by Bohenko, the state has collected more than $228 million in rooms and meals tax revenue from the 1,929 rooms inside of the city's 19 hotels and the 21,342 seats inside the city's 302 restaurants. For the last four years, the city has received more than $58.8 million for its share of those tax revenues.

Bohenko said there are other communities that are receiving more money even though they have far less hotel rooms.

With the number of restaurants and hotels, Bohenko said “this is something that I would hope the delegation could look at.”

City Councilor Chris Dwyer said that if the Legislature chose to fix the situation by “making it more proportional is a win-win for the state.” She added that if the city continues to see less rooms and meals, it becomes harder for city residents to support hotels  and restaurant development.

Norelli, who was elected the new House speaker, said state budget is running about $50 million behind because of a loss of revenues. “You could shoot me now for running for speaker because I think this is going to be the toughest budget we have had in years,” she said,

Rep. Brian Wazlaw said State Sen. Nancy Stiles, R-Hampton, has filed a bill that, if passed, would allocate 44 percent of the revenue based on what a community generates in rooms and meals tax.

Dwyer said that when state revenues go down, it puts more pressure on local communities to raise local property taxes.

Bohenko said this is also true when it comes to the New Hampshire State Retirement System. Bohenko said the biggest change was when the state removed the subsidy for pensions. He in FY 2014, the city would have to spend more than $6 million, or 90 percent increase, because of changes, which is up from $4.81 million in FY 2013.

Bohenko said the breakdown in increases would be 25.3 percent for police officers, 10.7 percent for general government employees, and 27.74 percent for firefighters. "For every dollar we spend on a firefighter, we are putting in 28 cents," Bohenko said.

Overall, Bohenko said the city has lost almost $3 million in subsidy from the state. “I’d be hopeful if we could see some of that pension subsidy come back in some form,” he said.

Bohenko said the city budget situation is becoming more tenuous as a result of the downshifting of pension costs from the state to cities and towns. “The budget process is being driven by the increase in pensions,” he added. “It’s like having a house being dropped on you when you are trying to build a budget."

Mayor Eric Spear said the situation will also put more pressure on the city to hire less public employees and provide less services. “Over the long term, it makes public service employees very expensive to hire,” Spear said.

“The reality is pension payments are 6 percent of the city’s budget,” Bohenko said. “It’s unsustainable for us.”

Wazlaw said the State Legislature took $39 million out of the state subsidy, which is causing all of this pain. He said the state has shifted from a defined benefit plan to a defined contribution plan, which means that state employees are no longer guaranteed the same level of benefits.

“We need a new revenue source” at the city level, said City Councilor Brad Lown. “What are the arguments about doing a local rooms and meals tax?”

Lown said it would be easier for the state delegation to present that legislation than to return rooms and meals tax revenue from the current system.

Unfortunately, Norelli said there are still not enough people in the state who understand how state budget downshifting increases their local property taxes. She said that as the pain becomes more acute for more people, it may be more possible for state lawmakers to provide the relief that communities need.