Westfield FY18 Budget Calls for 6+% Tax Increase
Congratulations to all of the graduates! I hope you all have bright futures in school, the military, or the workforce.
You read that headline correctly… You may be thinking “what about prop 2 ½ – isn’t that supposed to limit our tax increases?” Yes, yes it does, but it limits what’s called the “Levy Limit” – not the actual property tax (also known as the levy).
Before I discuss the taxes, let me give you something to mull over… When working on budgets, sometimes I think back to old math tests like the following: You’re taking the family on a trip to the Cape – to a destination that’s 120 miles from your home in Westfield. You get stuck in traffic on the Pike and at the halfway point you’ve only managed to average 30 miles per hour for the first half of the trip. What speed do you have travel on the second half of the trip to have an overall average speed of 60 miles per hour (A-75 MPH, B-90 MPH, C-120 MPH, D-None of the above)?
Ok, back to taxes. The property tax levy proposed in the City of Westfield FY18 budget is $73,562,260 plus New Growth (currently estimated at $1,000,000). Last year’s levy was $69,383,729. So, there’s an increase of $4,178,531 or 6.022%.
This increase is due to spending increases, and the fact that last year the City Council voted to use about $2.9 million of “Free Cash” in order to cover the budget while giving taxpayers a zero tax increase. We knew at the time that we couldn’t do that again – because there wasn’t, and wouldn’t be, enough in savings. I’ve said repeatedly over the last few years that we have to balance the budget based on realistic revenues – not the use of one-time money or savings. Now, we’re getting closer to the day of reckoning.
Even with that massive 6% tax increase, the budget still requires those additional hotel and meals taxes, increases in fees, and the use of $450,000 in Free Cash (out of the $1,081,802 available balance).
You may not want a 6% tax increase, and maybe you want to know how you can stop it? I guess you can hope the that Free Cash number gets bigger as we approach the tax rate setting meeting in November or December, and the Mayor and City Council agree to burn up more Free Cash to reduce the tax increase. However, as mentioned above, using one-time money or savings to balance a recurring and increasing operating budget is not a good idea. Maybe we’ll get lucky and see a massive increase in State or Federal Aid? I doubt it given the state of the Massachusetts and Federal budgets. So, the answer is to control spending increases, to prioritize spending, to eliminate waste, and to operate more efficiently. The City Council needs to make the hard votes to reduce the overall city budget, and that may mean changes in the budgets for Schools, Fire, Police, DPW, and employee benefits. There really are not other options. The other city departments aren’t big enough to have a significant impact overall. Some have suggested that we just raise more money. Well, that’s a good idea, but under Mass State Law we can’t create our own local taxes, and we’re limited on what we can do with fees and fines. There isn’t an easy answer. We need your help to encourage City Councilors to make the hard choices. Please review the budget online, attend the Finance Committee and City Council meetings, and call and email your Councilors. There will be a public hearing on the budget on June 21st at 6PM in City Hall. Anyone can ask questions and express opinions for, or against, any line item in the budget. The City Council is under a tight schedule this year, and is supposed to give final approval on the budget by June 30th.
Honestly, the city has improved efficiencies and trimmed the expense budgets, but we still have room for improvement. Mayor Sullivan, Department Heads, and City Council are working on several initiatives. They are listening to the residents and business owners when it comes to prioritizing roads, infrastructure, schools, and public safety. However, there just isn’t enough money to do everything that is needed given the current costs of labor, benefits, and expenses. We need more aggressive action, and we need it quickly. We are quickly approaching what’s called the “Levy Ceiling”, which is the maximum we can charge in property taxes under Prop 2 ½ (unless taxpayers vote to approve certain types of tax overrides). Once we hit that ceiling, we’ll be very constrained, and we won’t be able to support the annual budget increases that we’ve seen over the last several years. FYI, last year Westfield’s tax levy was approximately 89% of the Levy Ceiling. If the 6% tax increase goes through and property values stay relatively flat, we’ll be at just over 95% of the Levy Ceiling in FY18. Realistically, we could crash into that ceiling in about 2 years if property values don’t increase significantly or we don’t reduce spending.
We still have over $300 million in outstanding obligations to employees in the form of pension and retiree health care benefits. If we haven’t been able to address those now – with these regular tax increases – how does anyone think we’ll be able to pay for these when we hit the Levy Ceiling?
For those who think we can develop our way out of the Levy Ceiling collision with new commercial development, let me take a second to discuss one of the quirks of Prop 2 ½ and a split tax rate. Let’s say we build a new $25 million taxable commercial property. Everything else being equal, the Levy Ceiling will increase by $625,000 (2.5% under Prop 2 ½). However, the Levy Limit will increase by $927,250 (based on the FY17 tax rates). The city generally counts on spending these increases in the Levy Limit under the heading “New Growth”. That means the gap between the Levy Limit and the Levy Ceiling will DECREASE by $302,250, which means we’d likely hit the Levy Ceiling FASTER.
As I’ve said before, the finances are not rosy, and we certainly face very challenging times ahead. It is mathematically impossible to cover all of the city’s operating expenses, debts, and obligations given the current expectation of services, constraints of Prop 2 ½, the various labor contracts, and the long-term benefit obligations.
By the way, “None of the above” is the answer to that math problem above. It’s mathematically impossible.
Please feel free to email me at [email protected] if you have any questions or concerns about the City Budget or anything else. Like and follow my Facebook page, https://www.facebook.com/ElectDaveFlaherty. I’ll probably post a video about the budget and taxes in the next few days.
Dave Flaherty
Westfield City Councilor
[email protected]
PS. To learn more about Levies, Levy Limits, and Levy Ceilings under Prop 2 ½, review this guide prepared by the Mass Department of Revenue: http://www.mass.gov/dor/docs/dls/publ/misc/levylimits.pdf
