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Letter: Norwalk taxes could spur Detroit-like woes

By Peter Berman

To the Editor:

NORWALK, Conn. – A recent Hour editorial cautioned that we should heed the lesson from Detroit. But it’s an old lesson – major industry leaves town, municipal unions demand and receive ever higher salaries and benefits, jobs are scarce, property values fall amidst rising taxes to fund city worker salaries/benefits, those who can move out to the suburbs where the jobs are while the city’s population shrinks amidst sharply rising property taxes. And property values plummet. A ghost town emerges.

It happened in nearby Bridgeport. Once the “arsenal of democracy” in World War II the once-proud and vibrant Bridgeport with its mighty factories and munitions plants is a mere vestige of its former glory. I still recall in the 1970’s when managing a large wire and cable factory in Brooklyn I was invited to visit U.S. Steel’s electric cable factory in Bridgeport. It was the largest in the world, making huge reels of oceanographic cables. Ed Politi, U.S. Steel’s cable manager and former fighter carrier pilot in the Pacific, had enormous pride in the Bridgeport cable plant. Some years later he called to say it was all sold to Japan – they took everything away. And mighty U.S. Steel was but a shell of its former glory.

Of course, Norwalk is neither Detroit nor Bridgeport. Norwalk is primarily a bedroom community highly dependent on the Stamford financial industry – one in long-term decline and located in a state that’s become a poster child for fiscal mismanagement with the nation’s lowest job growth. Norwalk’s most visible problem is stagnant resident property values amidst a national housing price resurgence. That has prompted an outpouring of “for sale” signs together with a pent-up demand by long-time residents anxious to move ensuring stagnant property values for years to come.

Surrounded by 5 of the wealthiest towns in America with superb public schools, Norwalk property values are acutely sensitive to property tax rates. Unfortunately, our elected leaders over recent decades have bestowed among the highest salaries/benefits upon our municipal workers in the state. So it’s no surprise that, with much higher property taxes financing much higher municipal union labor costs (fifth-highest paid teachers in the state), Norwalk’s property values are under siege. Moving in any direction means lower taxes and better schools – a winning combination.

Realistically there’s not much hope for improvement. Our elected officials promise “blue sky” increases in the grand list from new development. But the vacant lands along I-95 suggest a decades-long failure. Any lingering hopes for improvement were dashed with Norwalk’s ever-higher taxes and spending during the 2008 Great Recession.

Of course, not everyone is unhappy. Norwalk’s municipal workers remain among the best paid in the state. Most live out of town to avoid the high taxes.

As a group, city workers are the largest and best paid in the city, with average salaries/benefits near $100,000.

As long as both political parties are firmly committed to raising taxes and spending year in year out and unwilling to restrain union salaries/benefit increases, Norwalk’s property values will continue to stagnate at best and then decline further come the next economic downturn. The end result is an ever more transient community – reportedly the third most transient in the state. In a very real sense, Norwalk is truly held hostage by its municipal unions and elected officials’ inability or unwillingness to restrain taxes and spending. Unlike Detroit and Bridgeport, Norwalk faces an unrelenting slow decline, at least as measured in housing values. Local elections are unlikely to change the outcome.

The “shame of it is,” as my good friend the late Wally Clark used to say, is that long-term residents still remember when municipal workers were paid modest salaries, lived in the city, our schools were held in high esteem and retired residents could always count on selling their homes to live comfortably elsewhere. Now, most retired residents are held hostage to stagnant property values, and the highly paid municipal workers mostly live outside the city in less onerous taxed places. The surprise of it all is that we still take notice of our municipal elections guaranteeing the same results over and over again. Our local elections are the ultimate “reality show.” No matter who wins, the outcome is the same – higher taxes and stagnant/declining property values. Even the Realtors are complaining.

Peter Berman

 

Comments

10 responses to “Letter: Norwalk taxes could spur Detroit-like woes”

  1. Tom

    I dislike overpaid workers just as much as the next guy, but it looks like our mill rate is about average or slightly below average, am I wrong? see below link: http://www.ct.gov/opm/cwp/view.asp?Q=385976

  2. M Allen

    @Tom, you can’t really look at the mill rate on that basis as it is only one part of the equation. Property values vary widely by location and thus the tax bill will vary widely even if all mill rates were the same. Our mill rate is half that of Hartford, Waterbury, Bridgeport and New Haven, but our property values are also higher on average. Likewise, Greenwich’s mill rate is half of Norwalk’s, but their property values are substantially higher on average. Intrestingly, despite Stamford being a larger city, their mill rate is lower than Norwalk. This can probably be attributed to modestly higher average property values along with a more vibrant commercial real estate sector. But I don’t know that for a fact. In any event, mill rates aren’t really ever the issue. They make that fit the as needed to achieve the required tax amount.

  3. Forrest Malloy

    Mill rates are adjusted to end up with the revenues the government needs. One city’s has almost nothing to do with the other unless the grand list valuation is calculated using the same exact basis, which in practice it is not.

    Revenues, Expenditures, per citizen, and per government worker are what matter. Also state taxes paid to state aid received ratio. Effectively Norwalk gets to pay Bridgeport’s property taxes under the current system. It is the redistribution of wealth model that failed in Detroit and will eventually fail here too. Bailouts and deficit spending will not change the situation. You can’t have more people riding in the cart than pulling it for too long. The cart and the cart puller break down eventually and then everyone suffers. Government assistance is fine, but able bodied people need to be contributing.

  4. M Allen

    Shame on you Forrest – able bodied people are either already carrying the burden or have better things to do than contribute. Besides, if you required all able bodied people to contribute, we would have an even greater number of disability claims than we do now to avoid it. In all seriousness though, there is no way of reducing the number of people in the back of the cart. They have votes just like the people pulling the cart and they outnumber us.

  5. Tom

    Can someone find numbers that show Norwalkers are paying more per person in city taxes than other people in other cities in CT? I would like to see this and then form an opinion, otherwise all this author’s statements are anecdotal.

  6. oldtimer

    There is a statement in the letter that “retired residents could always count on selling their homes to live comfortably elsewhere”, as if that is no longer true. It is still true for long time homeowners who decide to sell and retire elsewhere. It is not true for those who bought at the recent real estate peak and have not yet gained any appreciation, may even have lost some value. That small group may feel captive to stagnant property values, but not the long time home owners with well cared for homes.

  7. M Allen

    We keep reading this statement, or some variation, “an outpouring of ‘for sale’ signs” or “residents voting with their feet.” In my travels around Norwalk, I have not personally noticed an abnormal number of for-sale signs indicating this to be true. Moreover, I have spoken to a number of realtors who have stated that the inventory level is not abnormally high. They have noted that there is still inventory coming on the market from short sales and foreclosures that were held back by banks not seeking to flood the market, but the concept of an exodus seems overblown. Perhaps it is true, but it generally sounds like anecdotal evidence based on passing though certain parts of town or simply group think emanating from the echo chamber. Who knows. In any event, I am attempting to gather some stats, because it’s past time this argument is either confirmed or refuted.

  8. Tom

    M Allen, thanks, we need more people like you to bring the facts, because all these anecdotal statements about “for sale signs” are beyond annoying.

  9. Sherelle Harris

    Here is another take on the Detroit woes issue: http://www.nytimes.com/2013/07/29/opinion/krugman-stranded-by-sprawl.html?nl=todaysheadlines&emc=edit_th_20130729

    Take a look at the comments to the opinion piece as well.

  10. Piberman

    If City workers are among the very highest in the state then in a primarily residential community with a stagnant Grand List and relatively modest state aid our residential tax burden will also be quite high. Indeed, the Arbitration Award Report, citing City figures, cited Norwalk’s high salaries and high property taxes are responsible for our more pronounced property declines during the Great Recession. Since then property valves have been stagnant as has the Grand List. Since property taxes rise every year to fund ever higher City salaries and benefits the tax burden on homeowners rises. Roughly the median tax is about $6200 on a median valued home valued at about $470,000. But the City’s household income is but $72,000. What was especially discouraging was that even during the Great Recession City spending and taxes rose.

    Norwalk has become a high cost provider of City services. Without a major change in the City’s fiscal management that will not change. With 4% annual rises in property taxes in just under two more decades City residential property taxes will double. Neither property values nor incomes are likely to double in that period. Higher taxes against declining property values look more likely.

    To be fair these problems have been brewing for decades. But neither the current administration nor any any alternative proposes holding the line on taxes and creating a more efficient lower cost govt here in Norwalk.

    The future is not promising. A recession a year or or two away. Continued state financial problems, little Grand List change together with ever higher City salaries/benefits suggest lower property values and a more transient City.

    One really has to ask why in a City of modest incomes – just $72,000 per household and only ranking 17th in the state we have among the very highest City salaries in the state – 5th highest for teachers who comprise most of our City payroll. Either it’s because of the tooth fairy or because our elected officials haven’t been paying enough attention to City finances,

    As a group City workers are the best paid with costs almost $100,000 yearly. Without much more effective financial management our future is problematical.

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