City Councilor David Flaherty
Merry Christmas and Happy New Year!
I’d like to wish everyone a Merry Christmas, Happy Hannakuh, Happy Holidays, and Happy New Year! I hope you and your families have a wonderful holiday season, and I wish you all a happy, healthy, and prosperous New Year.
Congratulations and thanks go out to Westfield on Weekends, ArtWorks, Westfield Theatre Group, the sponsors and vendors at the several craft and farmer’s market events, and the students and staff at all of Westfield Schools who have provided wonderful holiday events and shows. These events improve the culture of our hometown, and help bring joy and a sense of community to many of our family, friends, and neighbors.
One thing that will make people happy, and help people have a more prosperous new year, is the ZERO tax increase that was approved Thursday evening by the City Council. This is truly a zero increase. The total property taxes for FY16 were $68,319,303. The total property taxes for FY17 will be $68,319,303 plus $1,076,140 in new growth (new value added to homes and businesses). This is the only time we’ve done this in recent years, and probably will be the last time for a long while.
I voted for this, and I’ve been given a lot of credit for putting the deal together that resulted in the Mayor increasing his recommendation for the use of Free Cash, however, honestly, Councilors Paul and Bean deserve a lot of credit for negotiating well with the Mayor and his team. Former Councilors Onofrey, Keefe, and Beltrandi also deserve credit for pushing for changes over the last several budget cycles. We all tried to address spending and reduce the tax burdens. The actions we took over the last several years led the way to this year’s deal.
I, and I’m assuming many of the other financial team members, are not a big fan of this method of tax reduction, and think this deal has lots of negatives. However, it is a tax break for homeowners and businesses, and hopefully it will set the stage for future changes in the way the city handles budgets and taxes. I know others tout the financial status of the city, and talk about “responsible spending” or “diligent efforts to manage”, etc… However, the reality is that the City is living beyond its means year after year, and is snowballing debts and obligations to the point that it is mathematically impossible to pay off everything owed by the City – even with the maximum allowed tax increases every year going forward. We have to change spending habits and address the long-term healthcare benefits owed to city employees.
The annual City budget has increased from $117 million in 2015, to $120 million in 2016, to $123 million in 2017. That’s about $3 million per year more in spending on average. Our annual property taxes can only increase about $1.75 million per year under Prop 2 ½. The City has covered the gaps with some new growth, the repeated use of Stabilization or Free Cash reserves, new taxes, slight increases in non-tax revenue, and state aid.
The City is fast approaching our “Levy Ceiling” – the maximum we can tax under Prop 2 ½. This Levy Ceiling is equal to 2.5% of the total property value in town. For FY17, the total value of property was $3.1 billion, and the Levy Ceiling is $77,656,148. That is the most we can tax without overrides or other special actions. However, Prop 2 ½ also has a “Levy Limit” that further constrains our annual property tax. That Levy Limit is based on the prior year’s levy limit, plus 2.5%, plus new growth. Last year’s Levy Limit was $68,967,726. A 2.5% increase would be an additional $1,724,193. And, this year’s New Growth was $1,076,140. Add all those up and you get a Levy Limit of $71,768,059. That’s the maximum the city could charge in property taxes in FY17. The budget submitted by the Mayor and approved by the City Council in June called for Property Taxes of $71,691,919 plus new hotel and meal taxes, plus the use of Free Cash. Again, the only way it balanced was by using Free Cash and by increasing hotel and meals taxes. At the proposed property tax level of $71.7 million, the city would have been at over 92% of our Levy Ceiling, and would have put us in a position of hitting that ceiling within a few years. This is a major concern. If we hit that ceiling, we’ll be unable to increase property taxes enough to support our growing needs – nevermind trying to address our snowballing obligations. By using Free Cash to reduce the Property Taxes this year, we are at 89.4% of the Levy Ceiling.
Last week, you may have read an article by another councilor who presented a graph about the Levy Ceiling, and he implied the Levy Ceiling line and the Levy Limit were on divergent paths, and that they would not intersect in the near future. He threw out that he discussed finances with experts, and even named our outside auditor to try to bolster his statements. Let me be clear, none of those financial experts approved his divergent line graph. Nobody familiar with our recent history, the city’s finances, financial mathematics, the real estate market, and the limitations of Prop 2 ½ would have created a graph with those divergent lines. In all likelihood, if things continue the way they are, we are on a track to hit that ceiling in the near future. Exactly when depends on the real estate market, city spending, and the level of property taxes. He repeatedly claims there is no certainty that we’ll hit the ceiling, and that nobody can be confident. That’s just not mathematically accurate. Actuaries and statisticians can predict confidence and levels or certainty about future events. That’s something almost everyone deals with on a regular basis when it comes to life insurance, health risks, 401K or pension predictions, etc… The math isn’t that hard, and just because you can’t be 100% accurate, doesn’t mean you can’t be accurate within a confidence range.
He and I agree on a statement by Auditor Scanlon who was quoted in the paper as saying we shouldn’t be using Free Cash for recurring operating expenses, and he mentioned conversations with other “financial experts” who suggest saving money for rainy days. Sorry, but my first thought when hearing this from him is:“duh!”.However, this city has a track record, and can’t seem to stop using Free Cash, or Stabilization, one-time grants, or other one-time money on operating expenses. Just few months ago, this same councilor voted for a budget that used Free Cash and that was still in deficit by about $1 million. Healso voted for major increases in the costs of labor contract without even knowing what those increases would cost on an annual basis, nor where the money will come from to pay for them. For at least the last eight years, this has been a recurring theme. Several City Council Finance Committees have tried to recommend reductions in budget growth to stop this trend, and have worked hard to build up savings in the city’s reserve accounts. Unfortunately, the City Council and Mayors have pretty consistently resisted the changes needed, and overrode or ignored the recommendations of the Finance Committees. There are many great needs in the city, and everyone wants great schools, roads, infrastructure, security, and recreational areas. These things cost money, and there are literally over $100 million in spending requests that are in the queue for necessary and highly demanded projects in the city. However, we just don’t have the money, and we can’t keep raising taxes forever. Eventually, we’re going to hit that ceiling, or tax people out of Westfield.
So, long discussion, but in the end, I voted for the use of the Free Cash to reduce to tax levy in order to give taxpayers a much needed break, to delay the collision with the Levy Ceiling, and the use up some of the Free Cash so that in coming years the Mayor and City Council will be more likely to address the budget without covering up shortages by using Free Cash or other one-time money.
Going forward, I’d like to see the priorities be: to reduce the growth in the budget to a point where it is balanced without using rainy day funds; to increase non-tax revenue; and, to include in the annual budget all known recurring capital items including adequate maintenance and repairs, periodic vehicle and technology purchases, and full coverage of all long-term benefit plans.
Happy Holidays!
Dave Flaherty
City Councilor
[email protected]
