Why Do Real Estate Professionals Care About State and Local Debt?

 It was recently announced that Connecticut has a debt load per taxpayer of $62,500, against an average across all states of $9300.  There are many ways to calculate debt, and to measure it versus average income, but this is a high number by any measure.  The reasons go back decades, most specifically to the 1980s, when Connecticut was flush with tax money, and many programs and benefits were instituted.  That, combined with the unusual strength of the public sectors unions in our state, left us with problems that still persist, and in some cases are getting worse.  The looming issue of State employee retirements, due to the benefit changes that begin in 2022, is leaving us, thanks to many exiting the workforce this year or next, with a much bigger roster of retired State employees, still entitled to the old package.

Why does this matter?  Ultimately, it affects property values.  The certainty of large future State expenses almost guarantees future tax increases.  Because we are not gaining population, as many other places are, the number we have to cover is not being spread over a larger group. This compounds itself as an issue, when those left to pay more decide to move out of state themselves.  For example, 37% of Connecticut's retired employees live outside of Connecticut.  So they don't pay taxes here, but get mailed checks every month.  So, to make up for that, we have put in very high estate taxes compared to other states, making older taxpayers move away even faster, since they don't want to die in Connecticut.  

This becomes a vicious cycle.  More people moving out means that taxpayers left owe more, which causes more people to move out.  You get the idea.  When fewer people stay or relocate into Connecticut, there are fewer buyers for property, making the market softer.  There are issues that go the other way, such as the fact that very little has been built over the past three decades, and that we have little land available for future construction.  COVID has actually helped us, given our open spaces and proximity to NYC and Boston.  That has caused shortages in housing and industrial real estate, for two examples, which is raising prices for those sectors.  

Within Connecticut, some cities and towns have their own debt loads that are high.  Hamden is a good example.  Taxes are higher on similar property than in surrounding towns, as Hamden struggles to reduce its debt.  Even though it is doing the right thing, there is pain for taxpayers in the solution.  It's easy to see how that scenario could play out on a statewide level.

What should you do?  Vote for fiscally responsible candidates.  Write to the ones already in office, and express your concern for added entitlements or givebacks.  Read the facts and take action as citizens.  And, above all, remember why you love living here, and work to preserve that, as well as promote Connecticut to others.