By Beth David, Editor
The Fairhaven Select Board and Finance Committee are both holding extra meetings to try to crunch numbers and figure out contingencies to get to a balanced budget. At its meeting on 4/3/23, the SB went over Town Meeting articles and discussed budget items, budget forecasting, and different ways to balance the budget this year, but also to keep the town in the black in future years. They are meeting again on 4/11.
The town is facing a shortfall of $450,000.
SB member Bob Espindola pitched the idea of using money that has been put aside for several years for a Public Safety Complex for other capital projects, and to abandon the idea of borrowing for a number of projects.* All indications are that the complex is not in the near future. That money is in the capital stabilization fund, an account used for one time expenses.
The town gets its revenue from a mix of state aid, property taxes (the tax levy), and local receipts.
The big rule in town government is not to use one-time money for ongoing expenses. The various capital funds are usually funded with “free cash,” the money left over from receipts or other budgeted items from the year before. That one time money is set aside to be used for capital expenses, such as repairs/ upgrades to buildings; large items, such as equipment and vehicles that last many years.
Ongoing expenses, such as salaries and everyday office expenses, are funded from recurring revenue, such as property taxes (the tax levy) or receipts. Receipts are the money the town gets from permit fees and excise taxes.
Generally speaking, each “bucket” of money has its intended uses and should not be used for anything else.
Mr. Espindola said that the money placed into the capital fund for the stated purpose of the Public Safety Complex was from the tax levy, not one-time funds. The money was just put into the fund, though, not specifically restricted to the complex.
His presentation included detailed accounts of how much money is in each account.
Proposition 2 1/2 limits the amount of money the town can raise from property taxes to 2 /12 percent of what they raised the year before. However, that is just part of the formula. Towns can raise more based on new growth and other things. It is a complicated formula, but in the end the state tells the town how much it can raise on the tax levy.
Town Administrator Angie Lopes Ellison said, in the meeting and in a followup interview, that there are three main things driving the shortfall. One, contract raises and cost of living increases that add up to 5%. Two, inflation is at about 7%. And three, the town has been using free cash (one time revenue) to supplement the operating budget (ongoing expenses).
All this under the constraints of Prop. 2 /12.
The formula the state uses is complicated said Ms. Ellison in a phone interview. They base their projections on the last completed filling, which is two years back. Just knowing about the sudden rise in inflation is enough to explain part of the problem. Then add the complication of the calendar year vs. the fiscal year.
“Our tax rate was set in January for a budget that doesn’t start until July,” said Ms. Ellison.
She said that the town’s expenses are also part of the formula. When the town uses free cash to supplement the budget, that money is not included in the formula, so the town loses out that way, too.
“It’s complicated,” she said, but there are ways the town can be more “strategic” with its budget.
The state has had Prop 2 1/2 since 1980, and everyone knows their taxes do not necessarily go up 2 1/2 percent. The formula is for the whole town, not individual properties, so as each property is evaluated, some go up and some go down depending on valuations.
This year’s tax rate will be $9.73 without the override, which means each residential property owner will pay $9.73 for each $1,000 that their house is assessed at by the Assessors Office, not valued on the open market, that’s usually more.
With the override, the rate will be $9.84, 11 cents more. The average increase will be about $43 for a home assessed at $394,058, the town average.
The big question at the SB meeting was no longer if the override is needed, but if it will be enough. The initial shortfall was $750,000, but the town pulled $300,000 from the OPEB fund (employee retirement fund).
If the town does not vote for the override, then the town will have to cut $450,000 from the budget. The recommendation is to take $200,000 from the School Department; $150,000 from the Fire Deparstment by eliminating two of the four new hires from January; and $100,000 from salary reserves, which would result in some raises and promotions not happening.
The Fairhaven Firefighters union reacted strongly to the suggestion that the town will cut two of the four new firefighters. In a press release they said that the four new hires are still not enough to fully and safely staff the department. The letter says that each shift should have 14 firefighters, but currently has six.
“These elected officials are attempting to tie the override to its ability to retain two of the four firefighters,” said the union. “The Town’s politicization of the public safety of our community and threat to purposefully cut our staffing is not only dangerous, but downright offensive to our hardworking, dedicated, and professional firefighters.”
The firefighters have already been hired and are training, they wrote, adding “Their livelihoods are not a political chip that can be used by Town officials to force our Union into supporting Proposition 2 1/2. We call on the Town officials to stop playing politics with public safety and to honor the agreement we reached in January.”
Ms. Ellison said the $450,00 should be enough, if things stay pretty much the same, i.e., no recession.
The town has created a special spot on its website with budget/ override information. Visit https://www.fairhaven-ma.gov/fy2024-override-information-hub to access information, including detailed budget documents, such as the townwide budget, capital budget, and the school budget.
In order for the override to succeed, Town Meeting has to vote for it and then the town has to approve it in a townwide ballot question. The SB will set a special town election date soon.
In any case, the town has to submit a balanced budget to Town Meeting. If it is a budget that has been cut to make up the shortfall, but is not realistic, for example, lowballing costs for gas or electric, etc., then the town will have to supplement the budgets with free cash in a Special TM. Which does not solve the problem or “right the ship,” said Ms. Ellison. It just “kicks the can down the road.”
Mr. Espindola’s presentation is available at www.FairhavenTV.com, 4/3/23 meeting.
*CORRECTED: An earlier version of this story stated that Mr. Espindola wanted to use the public safety complex funds for the operating budget. He does not support using stabilization funds (one time money) for the operating budget. He proposed that the town use the money in the Capital Stabilization Fund, including funds set aside for the public safety complex, for other capital projects that are slated to be funded by borrowing. This will save the town more than $1.5 million in interest over the course of the loan(s).
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