WESTFIELD – The City Council voted Monday night to table a $222,218 funding request to cover current overlay deficits dating back to 2009.
The reason for the council’s action to table the funding request is simple; there is no money in the city’s free cash account.
The Department of Revenue freezes municipal free cash accounts until it reviews the city’s book for the 2013 fiscal year, which ended on June 30, to ensure that there are no debts remaining to be paid.
The DOR then certifies that the city’s books are balanced, usually in the November or December time frame. Free cash, which is comprised of unexpected revenue not included in the fiscal year budget and any unencumbered departmental funds remaining at the end of the fiscal year, can then be spent to augment the budget and are typically spend for one0time, non-recurring expenditures such as capital equipment.
Mayor Daniel M. Knapik had requested that the City Council appropriate free cash to cover the overlay deficits which occurred in the 2009, 2011 and 2012 fiscal years. Knapik made that appropriation request in June when the City Council was focused on reviewing and approving the 2014 fiscal year budget.
The council never acted upon Knapik’s appropriation and the funds were frozen by the DOR at the end of the 2013 fiscal year.
The overlay account is one of the few allowed to be in deficit under state law. The city is also allowed to deficit spend for snow and ice removal, something that occurs annually.
The snow and ice deficit is usually balanced at the end of the fiscal year when departmental budgets are “swept” for unencumbered funds. The overlay accounts can be in deficit for years.
Ward 5 Councilor Richard E. Onofrey Jr., Finance Committee chairman, who made the motion to table the matter, explained that the overlay account deficit will be addressed after the DOR certifies the city’s free cash numbers.
Ward 1 City Councilor Christopher Keefe said Monday prior to the regular council session that the city annually sets aside $400,000 for the overlay accounts, money used for two basic municipal operations related to property tax.
“There are basically two functions of the overlay account, one is to fund property tax exemptions for senior citizens, veterans and blind residents, which accounts for about $200,000 of the account” Keefe said.
“The other purpose is to fund property tax abatements requested by property owners who fell that the property assessments were incorrect, too high, which accounts for the other $200,000,” Keefe said.
“We put $400,000 into that account, but for those three years, the city paid out more than that amount,” Keefe said.
The imbalance was due to a decision by the Appellate Tax Board (ATB) regarding a tax appeal of a decision by the Leominster Board of Assessors which voted to assess property tax on facilities at that community’s municipal airport.
Those facilities were located on land leased from the municipal airport and, prior to the Leominster assessors’ action, had been considered exempt from property tax. The unpaid tax revenue was a factor incorporated in the lease agreements for that property, but the funds went to the airport commission and not into the city’s general fund.
The Appellate Tax Board ruled in favor of the assessors and the DOR then ordered all communities with municipal airport to also tax all private facilities on city-owned land.
There are other similar precedents Keefe said. Cellular telephone towers erected on municipal property are also taxed based on the value of the structure.
Westfield’s Board of Assessors complied with the DOR directive, assessing the facilities in the same category as warehouses, leading to a number of appeals to the ATB resulting in abatements during those three years the overlay account was in deficit.
The Airport Commission has also taken action to modify and reduce the cost of lease agreements to reflect the new taxes paid by facility owners, reducing the airport’s revenue income, but increasing the city’s tax revenue.
