Informal Education Series: “There is no rabbit in the hat” to solve Berlin’s funding crisis

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In our second installment of the “Informal Education” series, we will explore how the local economy affects schools. In this article, our Policy Director Liz Canada writes about how events, like the closing of the city’s paper mill, have shaped the city’s entire economy–and schools–for more than a decade.

I don’t know anything about ATVs – and I never thought I’d write a phrase like that, yet it feels important to state up front.

When I met with Superintendent Cascadden in our office in Concord, she was sad to find out I would be in Berlin when she was away.

“Are you an outdoors person?”

Yes, but not really.

“Have you ever ridden an ATV?”

I hadn’t, no. She shared that this is a major part of the culture in Berlin, that the experience is incredible, and if I had the time, I should rent one and ride the trails.

In our first Informal Education Series article, I covered the basic overview of one of the funding issues in Berlin: a decrease in stabilization grants, which has resulted in about $1.3 million dollars over the course of three years.

But questions that you might have wondered about include: how is Berlin in this position in the first place? Why do they need these stabilization dollars, and what, if anything, have they done to, you know, get themselves out of relying on this money?

It turns out, ATVs might hold part of the answer.

Employment opportunities (Or lack thereof)

Fair warning, this post is about to get into the weeds on city budgets. Hang in there, it won’t be too deep.

If you’re someone who likes to hang out at your local government meetings and hear your Select Board or City Council or other elected body talk about budgets, you probably already know all of what I’m about to share! Additionally, since we’re in New Hampshire, there is a high likelihood that you yourself have been elected already.

But maybe you aren’t that person. So let’s dig in.

Cities and towns in NH are desperately trying to attract and retain residents. Economic development experts across the state often cite one or more of the same barriers in this endeavor: the need for more affordable housing, the need to improve schools, the need for more employment opportunities.

For Berlin, the city has affordable housing. And, it prioritizes its students, even in the face of significant budget cuts.

But jobs? That is one of the city’s biggest challenges. Unlike many of our cities, Berlin has a high unemployment rate and lack of job opportunities.

In May 2006, Fraser Papers, the Canada-based paper firm, closed down its pulp mill in Berlin. In my interviews with Berlin folks, this event came up a lot. Teachers mentioned how families of their students are still unemployed all of these years later, and that this closure has had a devastating impact on the community.

In 2007, about a year after the mill’s closure, the NYTimes ran an article about the hope that the city saw: the federal prison that would open in Berlin, and the tourism industry. Specifically, a new ATV park.

12 years later, though, where does the city stand? City Manager Jim Wheeler sees it as just the beginning:

“We are really just in the infancy of coming out of a postindustrial doldrum because the paper mill is gone and the severe amount of employment that it brought is gone – although we’ve patched some of that with some workforce, a couple of local prisons, Burgess Biopower which now occupies the site of the former pulp mill…Slowly, we’re rebuilding what we had. But it’s a long crawl, if you will. It’s a tortoise race, and we’re still very fragile economically.”

So, the big takeaway I want you to remember is: the economy has not recovered from the loss of the paper mill in 2006, despite significant effort from both formal and informal leaders in Berlin.

The cycle of high property taxes

Berlin’s total equalized tax rate in 2018 is $43.67 — and so, even with subjectively affordable housing, the tax rate is the highest in the state. And I write “highest in the state” because “equalized tax rate” is the rate the state uses to compare communities to other communities, even though that particular number may not be on a property tax bill. (Want to learn more about equalized tax rates? Click here!)

City Manager Jim Wheeler talked about how the tax rate has affected their local economy:

“We are already struggling with entities who want to come here to conduct business, and one of the big impediments is our tax rate. They look at us compared to other places in the state…and they say, ‘The math doesn’t work.’”

That is, with the highest tax rate, city leaders have found it difficult to bring in new businesses.

Figure: Property Wealth Per Student

And here is the cycle in which Berlin finds itself. One way to lower the tax rate is to have a larger taxable base. To start, though, over 60% of the city’s land is not taxabledue to federal property, such as the White Mountain National Forest. And remember the federal prison I mentioned earlier, referenced in the NYTimes article? Although it brought employment opportunities, Berlin also lost that as a taxable asset once it became federal property.

The city wants to lower property tax rates to attract new businesses and keep existing ones in the city, but the taxes are so high that they deter potential businesses. So, it becomes a cycle: without more businesses, there is a smaller pool from which to raise money for the city, resulting in higher taxes. But the higher taxes keep businesses from moving to Berlin.

To quote the City Manager: “I really see a major spiral if this is not fixed.” Although they are working on revitalizing downtown, without a lower tax rate, this will prove challenging.

“The impacts of education funding are so, so dramatic”

So let’s return to the city budget. Another way to decrease the tax rate is to cut city services: schools, police, fire, public works. City Manager Wheeler explains the budget process in Berlin:

“We start the budget process in January, and it concludes essentially on July 1 when we have a new budget. There seems to always be some sort of unanswered piece of information that gives us uncertainty. And I will say up until this year, typically the city pulls a rabbit out of the hat. In other words, we get far enough in the process, and whatever it was we were uncertain about, we figure it out, and we find a way to get through the budget. This year, there’s a very big shadow over the budget, and it is all education funding. And there is no rabbit in the hat other than what we want the legislature to do, that’s the only rabbit. There is no other solution to this. There certainly isn’t one locally. Because the impacts of education funding are so, so dramatic.”

The decrease in stabilization grants have meant incredibly difficult choices for the City Council and School Board. Berlin already made the decision to close their only remaining elementary school, Brown Elementary School, because of cuts to state funding for schools. No matter what happens in the legislature, with the committee of conference, or with the Governor over the next two weeks, that school is closed. More on that later.

But the loss of education funding –$1.3 million to date, with more cuts on the way– affects other parts of the city:

“Just this year, we prepared a budget that factors in all of the reductions. The fire department is looking at a reduction of two staff, two firefighters. Great people that we have, great families.”

The police department is looking at two reductions, as well. Public Works reductions include staff, as well as line items. Each year, there are $6-$9 million in capital improvement projects identified at the beginning of the budget process, which are then reduced down to $500,000 – $600,000. And so on, and so on.

The decrease in stabilization grants have rippled throughout the city budget, not just the schools.

To quote Jim, again: “stabilization [grants]- if that’s not fixed, we might as well forget economic development.”

And that’s where Berlin is right now: no rabbit in the hat remaining.

Jim consistently emphasized that there is hope in Berlin, that this is the beginning of an uphill trajectory – but that they cannot do it alone, locally.

When my meeting with him was coming to a close, I asked him for a lunch recommendation – and when I arrived, there was a board with the lunch specials and a sign greeting ATVs. It seems as though the entire community embraced ATVs – I’m sure part of it is economic, but I imagine most of it is fun. And, okay, I didn’t rent one on this visit, but this is certainly another motivation to go back.

Our new “Informal Education” series explores education through the eyes of real people. Over the next few weeks, we’ll provide insights into what we learned speaking to city and district leaders, educators, family members, and students in Berlin and across the state. Want to share your story? Email us at staff@reachinghighernh.org!