The court ruled unanimously that the cap violates state law governing local budget making authority.
The court said the cap infringes on the sole authority of the aldermen and mayor to approve the city’s budget, as outlined in state laws that implement the home rule amendment of the New Hampshire constitution. The court said another provision requiring a two-thirds vote by city aldermen to override the cap also is invalid; state law requires a simple majority vote.
Manchester’s tax cap, which would hold increases in property taxes and city spending to the rate of inflation, was approved by voters in November 2009. It would have applied to the budget now being crafted to take effect July 1, 2011.
While the decision applies specifically to Manchester, a lawyer who represented city residents opposed to the cap said it likely will undermine caps in other municipalities, such as Nashua, Franklin, Derry, Dover, Laconia and Rochester.
“I can’t see how any other tax cap wouldn’t be subject to the same infirmities the court found with the Manchester cap,” Attorney Robert Backus said.
George Lovejoy, spokesman for New Hampshire Advantage Coalition, which lobbies for reduced government spending, said state laws should be amended to respect the will of the voters.
“The people spoke out on this and they want a spending cap,” Lovejoy said. “The spending cap in this case does not take away from the authority of the local governing body because it allows an override.”
“If, in fact, this is in conflict with state law, then the state law should be changed to allow for citizen input and a spending cap,” Lovejoy said.
State Senate Republicans issued a statement Wednesday saying they would propose “taxpayer protection” legislation to resolve the conflict between state laws and local efforts to control spending.
Nashua Mayor Donnalee Lozeau said the ruling doesn’t weaken the message taxpayers send.
“The message of a spending cap or a tax cap is that voters want a check on spending and tax growth,” Lozeau said. “As local officials we need to hear that that message loud and clear, whether it’s the law or not.”
Lozeau said Nashua’s tax and spending cap has been on the books for more than a decade.
Ryan Cashin, a Manchester firefighter who fought the tax cap, called the ruling “a huge win for people who care about their communities and want to protect the New Hampshire way of life.”
“Tax cap gimmicks are bad policy,” Cashin said. “They reduce police and fire emergency response, do real damage to public education and negatively impact local businesses.”
A superior court judge last year struck down a proposed tax cap in Concord.
Judge Diane Nicolosi said the proposal would interfere with the city manager’s duty to present a budget based on the needs of the community. That cap was proposed by the New Hampshire Advantage Coalition.