Override Support Given by LWVN
by Amelia Koch
At its February meeting the LWV board of directors voted to support the mayor's request for an $11.5 million override of the tax limit set by proposition 2-1/2. Our ability to come to decisive action on this issue required a good deal of investigation and questioning of the state of city finances as well as some understanding of how the city came to be in its current position.
The possibility of an override had already been discussed prominently in the Newton Tab and in the Boston Globe West Weekly section, so we had a good idea of the questions that were being raised. Below is a summary of our fact finding on the salient questions regarding the city's budget.
What is the city's current budget situation?
The city's current FY2002 budget is $208 million (not including water and sewer charges). The major source of city revenue is property taxes, although in recent years state aid has been increasing as a percentage of the budget. Projections show revenues increasing next year by $4.9m.
Why is next year different?
Next year is different for a number of reasons. On the revenue side, State Aid, which has been growing rapidly in recent years (over 20% and nearly $4m last year), will be, at best, the same next year as this year and may well fall below the current allocation. City estimates show a small drop in State Aid. Property taxes, by far Newton's largest revenue source, normally grow by 2 1/2 percent of the prior years tax base (this is an average) plus any new property that comes on line. In recent years there have been several large new properties developed that added to the rolls - including Lasell Village and the Jordan Marsh complex on Grove Street. Lasell Village added over $1,000,000 in tax revenue. For FY2003 there are no major new property developments coming on line.
These changes in revenue growth are the major reasons why next year is different. However, there are also pressures on expenditures. Health care costs are rising by 15% next year and other benefit costs are rising as well. Salary contracts already in effect contain increases of between 3% and 4%. Special Education costs are increasing although the expectation is that those increases will moderate within the next few years.
Newton is not alone in any of these concerns; all towns and cities are facing similar problems and many of the western suburbs are requesting or considering overrides of their own. In fact of the 32 cities and towns in west suburban Boston, only Newton, Norwood, and Waltham have passed no override since Proposition 2 1/2 was passed. Most communities have passed more than one.
What are the known costs going forward?
Are there reserves available that could tide the city over a difficult year?
The simple answer to this question is that there are some reserves that could be used but they aren't enough to cover the shortfall, and using them would leave Newton with a reduced capacity to respond to unanticipated events such as hurricanes, floods, blizzards, or terrorist attacks. Also, some of the reserves although not legally restricted (and many of the reserves are legally restricted) are already designated for a specific purpose. Examples of designated funds would include the fund set aside to pay workers compensation ($1,100,000); the money beginning to accumulate in accordance with the city's plan to pay for the high school renovations ($2,171,993); or the money received annually from the marathon normally used to renovate city parks ($95,000).
One additional reserve that people often mention is " Free Cash" ($5.4m this year) which is largely composed of budget surpluses from the prior year. Unfortunately "Free Cash" is already committed. Part of "Free Cash" is already included in next year's budget ($1.7m). Part will be used to fund certain of the city's capital needs (e.g. roof repairs and replacements) ($2.7m). The capital allocation is well short of what is needed. The remainder ($1m) provides a "rainy day" fund in case of an extra snowy winter or emergencies such as the overtime firefighters incurred during the Thompsonville fire. It would be possible to use more "Free Cash" to fill the budget gap but inadvisable. In fact it would be a "best practice" in our opinion if the city did not rely on the prior year's "Free Cash" to fund the next years budget.
Why is the override a responsible solution to the city's financial situation?
Management of the city budget is prudent, and the city's AAA Bond rating is predicated on such prudence. Although the city should always look for opportunities to improve and become more efficient we see no way within the existing budget structure to make up for a gap of this size. There is a clear need for an override if we are to maintain the level of city services and school programs we have currently.
Limited Tax Relief is available according to state laws, for certain Seniors and the Blind. Clear, well organized information is available on the Newton assessor's page on such tax relief.
We invite you to join on us April 30th at your local polling place to vote Yes!
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Last updated: 1-Apr-02