Split Rate/Tax Classification Workshop Schedule

At our November 18th Council meeting, we received the annual tax classification measure from the Mayor.

We will take up this measure at the December 2nd Finance Committee meeting, with a special Tax Classification Workshop to precede the meeting.

The workshop is at 7:00 p.m. and the Committee meeting at 8:00 p.m. I encourage all who have an interest in this matter to attend both the workshop and the committee meeting.

Amesbury's tax rate is currently divided, with residents and commercial/industrial tax payers paying different rates. Commercial/industrial properties are taxed at a rate 15% higher than residential properties. As you may already know, I have opposed raising commercial and industrial property taxes. Here is the agenda:

Finance Committee Agenda
Tuesday, December 2, 2008
Town Hall Auditorium
7:00 PM

Roll Call

Classification workshop

Public Hearings:
2008-095 An Order to request the Municipal Council vote to hold the annual Classification hearing to vote on four (4) separate items in order to establish the tax burdens for each class of property.

2008-096 An Order to request the Municipal Council vote to increase the exemption amount of qualified applicants.

2008-100 A request that the Municipal Council vote to declare as surplus a municipal vehicle belonging to the Department of Public Works.

Adjourn

UPDATE: CLICK HERE to read the Annual Tax Classification Report produced by the Assessor's Office.

As many of you might already know, I strongly opposed the 2006 and 2007 Council decisions to split the property tax rates and raise taxes on commercial and industrial properties. I will be reviewing the information provided by the Assessor and remain inclined to bring Amesbury back towards a single tax rate for all properties.

Busy Election Morning!

Long line at Town Hall this morning, first thing today. Always great to see people enthusiastic about exercising their right to vote!

No on Question 1

Please consider voting NO on Question #1 on the November 4th Ballot. Eliminating the income tax would eliminate about 40% of the Commonwealth's revenue. Taking regional schools into consideration, Amesbury would lose about $15,500,000 in annual aid from the state. The effects on public education, public safety and infrastructure in Amesbury would be extraordinary, not to mention state-wide cuts to the wide variety of public services provided (mental health, public health, children services, elder services, veterans' services). For detailed information on the effects in Amesbury, go to: http://votenoquestion1.com/towns.

Negative Free Cash for FY08 - What Does It Mean?

There have been some articles in the Daily News lately that have raised some alarms in the community. The Commonwealth's Department of Revenue recently certified Amesbury's 2008 financial records. This included a certification that Amesbury had "negative Free Cash" at the end of the year. Now, we usually have positive Free Cash and have used it to put $$$ in the Stabilization Fund, pay for over-budget snow and ice removal costs and other mid-year expenses.

What does this mean, "negative Free Cash"? Sounds like we ran a deficit. The bad news is that we won't have any unrestricted ("Free") money available through the rest of the year rolled from 2008, which only makes our outlook through the remaining 8 months of the fiscal year all the more challenging (see post below about budget cuts). The 'good' news is that this does NOT mean that Amesbury ran a deficit last year. In fact, we ended the year with positive revenue over expenditures, after adjustments.

The "Free Cash" calculation is complicated. The Mayor gave a presentation to the Finance Committee on 10/28/08 to clarify where we stand. You can CLICK HERE to view the PowerPoint presentation that Mr. Kezer gave us. Even though we ended the fiscal year with a positive balance, we have to deduct several MAJOR costs from that balance. First, there is property tax revenue that we have figured in the FY08 budget that has not yet been paid. This means that we have to account for it as if we will NOT ever collect it, so we deduct it from our positive balance. As of June 30, 2008, this was $763,100. Next, we have to set aside even more $$$ to cover possible loss of revenue from property tax abatement requests, called the "Tax Overlay". This is about $500,000. Then we have to set aside $600,000 for taxes due on the abandoned Microfab site; we may never get to collect those taxes, either.

So, even a $977,000 surplus gets captured and seized up by these different liabilities. As we collect the rest of that $763,000 in property taxes due, we will get to credit that towards this year's Free Cash estimate at the end of FY09. And if we may not have to cover $500,000 in tax abatements, so that $$$ would free up, as well. The whopping $600,000 that we have to basically escrow to cover Microfab taxes due will continue to be a big drag on our bottom line, until that property and its environmental damage gets cleared up and sold. In accounting terms, these are "liabilities" that we either will have to pay later or are revenue we may not collect, so we have to budget funds to cover them.

Clear as mud?

Looking forward to the FY10 budget, one thing we can improve is eliminating our reliance on Free Cash to inject money into the Stabilization Fund and cover Snow and Ice Removal when it goes over. We routinely under-budget that amount and should not assume that we'll always have a positive balance. Also, I wonder if the $763,100 delay in over-due property tax payment is either a sign of increasing inability to pay AND/OR a function of foreclosed properties (where taxes don't get paid until the property finally resells). If so, this means we will have this problem again at the end of FY09, carrying more past-due taxes.

Capital Improvement For Police and Fire Departments

The Mayor has recently brought 2 capital improvement requests for the Police and Fire Department buildings to the Municipal Council, including one for $600,000.I fully support them both.

The first one has already been approved and is rolled into a second request, which the Finance Committee voted to recommend for approval at our 10/28/08 Meeting. You might recall that in 2006 the Mayor requested about $80,000 to grind and re-point the exterior of two sides of the Police Department building on School Street. After much arm-wrestling, the previous Council approved only $60,000 for the work. Unfortunately (and as was apparent at the time), this was insufficient funds to make the necessary repairs.

The building was leaking and the City used a portion of the funds (about $12K) to apply a temporary chemical seal to the exterior of the building, putting off the real needs of the facility until a new request for funds could be made. In the meantime, the building's heating system failed. The Mayor requested that the balance of the original appropriation (about $45K) be allowed to be used to help replace the heating system. (The Mayor had to get approval to use those monies for a purpose other than re-pointing the brick exterior.) We approved this request at our October MC meeting.

The Mayor then brought a large-scale request to the MC to comprehensively address the exterior and heating/cooling needs of the Police and Fire Department buildings. This request is for a $600,000 bond to finance the grinding and re-pointing of brick exteriors, the replacement of 36 windows with energy efficient units, the replacement of HVAC units in both buildings and the repair of the roof at the Fire Station.

It is important to note that this is a bond request, meaning that we will be borrowing the money for a 15 year term, rather than paying it out of a single year's budget. This is how all major capital improvements should be handled, spreading out the cost of the work to all of the 'users' (meaning, taxpayers) of the asset, including future ones. Amesbury enjoys a relatively low debt service-to-budget ratio and thus is in a good position to absorb this cost in its budget.

On 10/27, a number of us Councilors took a tour of both facilities at a posted meeting. This included a visit to the roof of the Firehouse. I can say in very good conscience that the building is in bad shape and it is in the taxpayers' best interest to invest in these properties and protect these major City assets. Here is just one (cell phone) photo from the tour, to give you an idea of the bad shape they are in:

Click HERE and hit the 'ready-only' button to see a whole Slideshow of photos. There were signs everywhere of extensive water infiltration and damage, especially in the Firehouse.

It is worth noting that these repairs were prioritized at the top of the list in this years Capital Improvement Plan (2009-13). This is one of the first things that I checked. It is good to see the CIP working as it should, to identify, prioritize and schedule funding for our capital needs as a community. Maintaining and investing in public facilities is also a priority of the Master Plan.

2nd Quarter FY09 Budget Cuts

At the October Council meeting, Mayor Kezer proposed $125,000 in budget cuts for the current year: $100,000 from the waste removal/recycling budget and $25,000 from Insurance. The good news is that there is room to cut these amounts from each line item without any change is services to the community. The bad news is that these cuts are a taste of things to come. Local revenues are principally made up of property tax and excise tax collection. Excise tax is variable and depends on the value of property subject to excise tax. As I noted back in January 2008, all of Massachusetts is experiencing a dip in excise tax, as folks put off buying new vehicles, making the taxable base go down. Amesbury is experiencing its share of this, with a decline in excise revenues.

Worse, the Commonwealth is experiencing significant drops in tax revenue collections, due to the downturn in the economy. As economic activity slows down, incomes dip and capital gains decline, the tax revenue from these sources will go down. In mid-October Governor Patrick announced wide-ranging 2nd quarter budget cuts. For the moment, local aid to cities and towns was spared any cuts. But as the downturn continues and the Commonwealth has more revenue drops, it is a real possibly that local aid cuts will be made.

You can read the Mayor's 10/14/08 letter to the Municipal Council about this situation by clicking here.

Energy Task Force Established

At the October Municipal Council meeting, we established an Energy Task Force. It is charged with reporting back to the Mayor and the Council with specific recommendations regarding municipal energy use. This is a time limited Task Force, with a commission ending at the end of December, 2009.

Here's the heart of the measure:

3. The Task Force shall report to the Municipal Council and the Mayor regarding the following:

a) Strategies to reduce energy costs of city-owned facilities and vehicles through energy efficiency and renewable energy measures, including strategies to conserve electricity, vehicle fuel, natural gas and oil and identify cost-saving measures, such as performance management contracts or use of bio-diesel fuels;

b) Develop city-wide programs and measures to promote and facilitate smart energy strategies for Amesbury citizens, including energy saving programs and renewable energy generation projects on both public and private real property; and

c) To accomplish the above, identify state and federal grants and resources such as the Massachusetts Technology Collaborative, UMass Amherst’s Center for Energy Efficiency and Renewable Energy, the Executive Office of Environmental and Energy Affairs, the Department of Energy Resources and the Department of Environmental Protection to accomplish these goals and assist the city in applying for and implementing such grants and resources.

The Mayor is accepting applications now for this Task Force. You can find an application HERE. Please consider joining this and other Boards and Committees.