Council cuts tax rate increase with free cash

WESTFIELD – The City Council approved the use of $661,776 from the free cash account to reduce the tax rate increase and adopted a shift factor that puts more of the burden on business to compensate for a drop in the total value of commercial, industrial and personal property of $23 million for the current fiscal year.
The value of residential property continued to climb in the city, increasing by about $20 million as a class for the 2016 fiscal year, mostly due to new home construction and improvements to existing properties.
The vote to use the $661,667, which lowered the tax increase from the maximum 2½ percent allowed down to 1½ percent, was approved by a slim 7-5 majority.
A number of City Council members argued that the rate should be based upon the budget approved last June and with the 2 1/2 percent increase.
At-large Councilor David A. Flaherty said the motion to reduce the levy to be raised through property taxes “is a feel good number to reduce the tax increase.”
“The time to cut the budget was in June and we will have $1.6 to $1.7 in new spending needs, such as severance, overtime, pensions this year,” Flaherty said. “We will have to end this (fiscal) year with a couple of million in free cash for next year. Anytime we give back, it’s just temporary.”
At-large Councilor Brent B. Bean II Bean argued that the council should be putting free cash into improving the city’s roads and drainage, and that using it as “a feel-good gesture” is not the best use of the $661,667.
“We have too many infrastructure projects in the city to give back that money as tax relief,” Bean said. “I’d rather citizens see us putting money into roads. We’d get a bigger bang for our buck when we invest in the infrastructure of the city.”
At-large Councilor Matthew VanHeynigen said “we’re reducing what will still be an increase, we’re just softening the blow.”
At-large Councilor Dan Allie said that “some people really need tax relief. Things will be tight this year, so we have to work together, as a city, to find ways to be fiscally disciplined.”
The council voted on several residential shift factors, which moves the tax burden from the residential property class toward CIP taxpayers, before adopting a factor of 1.65 recommended by Flaherty on a 10-2 vote, after rejecting shifts of 1.66 (on a vote of 3-9) and 1.68 (also a vote of 3-9).
A shift factor of 1.75, proposed by At-large Councilor Cindy Harris, was never called for a after the 1.65 factor was adopted. That shift factor would have resulted in the lowest residential tax rate increase, 47 cents per $1,000 of value and the highest CIP tax rate of $38.90 per $1,000 of value, an increase of $4.21.
The 1.65 shift will result in a residential tax rate of $19.44, an increase of 90 cents per $1,000 of value over last year’s rate of $18.54 and a CIP tax rate of $36.67, an increase of $1.98 per $1,000 of value over the 2015 fiscal year rate of $34.69.
Ward 1 Councilor Christopher Keefe warned that if the 1.75 shift was adopted, that could be a problem next year.
“We will have exhausted all of our reserves if there is another increase in (total) residential value,” Keefe said. “That’s why we have shied away from this. This is not the time to do this.”
Ward 6 Councilor Christopher Crean, a member of the Finance Committee, argued that “businesses are not the entity that should be slapped in the face. They live here too, and they provide jobs.”
Flaherty said that a business does look at tax rates when deciding where to do their business and that a high tax rate cools interest in locating in that community.
“A tax rate of $38.9 is not right,” Flaherty said, making his motion to adopt the 1.65 shift “which makes up for the drop in CIP values because of depreciation.”
Bean said the council had adopted a shift of 1.63 for the past five years because CIP values had been increasing.
“I think the council has done yeoman work shifting it that way to help the business taxpayers, but we have not seen the benefit (of a lower business tax rate),” Bean said, adding that attracting new business and retaining existing businesses would have been a viable benefit for the city. “That has not happened.”
Bean also said that a greater percentage of the city budget is now funded through local property taxes as revenue from state aid has declined. Property tax financed just 46 percent of the budget in 2008, while this year local property taxes will account for 55 percent of the city’s budget.
At-large Councilor James R. Adams said that a large jump in the CIP tax rate “doesn’t show businesses in town that we are supporting them. We can’t lose those businesses. We have to help to keep them afloat.”

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