Tuesday, October 30, 2007

Milfords New Mill Rate Takes Effect on Jan 1, 2008

Like most towns affected by the new property assessments, Milford got assessed at the peak of the Real Estate Boom. The assessments done in 2007 were completed as Connecticut law requires every town to do. Our taxes are then re-calculated based on a new mill rate of which is based on 70% of your homes "real value" as of its assessment date. To explain this further, a mill is equal to $1.00 of tax for each $1,000 of assessment. To calculate the property tax, multiply the assessment of the property by the mill rate and divide by 1,000. For example, a property with a assessed value of $50,000 located in town with a mill rate of 20 mills would have a property tax bill of $1,000 per year. (In Milford our mill rate as of today is 31.77.)

2008 could be the year that breaks the backs of Milford's residents. This is of great concern to me because most of the towns frustrations are being erratically played out in this years municipal election for Mayor. To begin we must look at the fundamentals in our town and the areas town residents will be affected the hardest.

Inflation is affecting everything, this is largely due to federal policy of spending more than the nation can afford to pay. When America continues to borrow, borrow, borrow and then print money to pay our bills, the whole country gets quietly taxed by way of inflation. Simply put that $20.00 in your pocket loses its value at the rate of about a 1.5 cents a week. This happens every time consumer prices go up, and the money supply (M3) is expanded.

Energy, is at the forefront of these cost of living increases in town. Electricity is up 90% over the last 7 years, and Connecticut has the highest gasoline prices in the Continental USA, second only to Hawaii. Oil is at $94.00 a barrel making the cost of staying warm this winter the most expensive in history. Poor people are also affected as Bush just cut funding to the energy assistance program.

Mortgages, being in the mess that they are in and set to re-adjust in 2008, is causing the New Haven Milford area to lead the charge in the State Foreclosure fiasco.

Homeowners Insurance, has increased this year making the required home owner escrow payments even higher than usual. This escrow is also inclusive of many double digit increases in property taxes.

All our foreign made goods are expected to rise in value as the U.S. dollar continues to purchase less and less. The dollar has already lost over 50% of its value when compared to other major currencies. This makes all those inexpensive foreign produced "Wall-Mart" items more expensive.

Food costs are also up dramatically over the last five years making the cost of feeding a family that much more expensive.

The city and its tax policy is just struggling to maintain the existing infrastructure it already has in place. To lower taxes in Milford one would have to reduce the city services and size of the government. This is a very unlikely and difficult task, given that the largest employer in Milford is the city itself. Would the town support a hiring freeze, or 10% expansion of the teacher student ratio? This could be debated at the local level, but it is usually very unpopular because it gives teachers more work for the same pay.

These ideas, however, may be largely irrelevant because it is entirely possible that the city of Milford may be headed for a large and unexpected involuntary adjustment due in large part to macro-economic monetary policy of which it has no control over. Foreclosures are just the first sign that the city demand is greater than the provisions of the city residents. This is expected to accelerate further, as baby boomers go bankrupt on health care costs and the lack of good paying jobs continue to leave our state.

Currently Milford is at risk of mass real estate depreciation, this will put the Mill Rate out of kilter with the true assessed home values. Should the dollar continue its decline, our middle class homes will be all but unaffordable to the next generation of home buyers. Foreigners, however, will find great bargains on America's properties as currencies like the Euro, and Canadian Dollar continue to appreciate.

Sadly, Milford's position on the shoreline may become a great opportunity for foreigners to purchase second vacation homes here in the U.S. This may be good for our town as these vacationers would probably not have children in our local schools and would likely only be here seasonally. This would help our struggling mill rate of which is based on out of kilter assessments. The news today is that home prices across America are the lowest in 16 years. If this is true of our town as well than that makes the current mill rate deceptively higher than what you might think. For now the best thing we can do is be vocal about future State and Federal tax increases, stay out of debt, and get a good deal on a cord of wood this winter.

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