Select board member asks town to consider passing article 14 at Town Meeting

June 10, 2020 | Mark Gold

LONGMEADOW – The following article is submitted by Mark Gold, a member of the Longmeadow Select Board and chair of the select board’s Tax Ceiling task force. It is an additional effort to further explain Article 14 on the Town Meeting Warrant.

 In the June 4th edition of The Reminder, Dr. Andrew Lam wrote about Article 14 of the Longmeadow Annual Town Meeting. Article 14 seeks approval for the town to pursue a Home Rule petition with the state Legislature that would, if ratified by the town after passage, exempt Longmeadow from the tax ceiling provision of Proposition 2 ½.  

 I believe it is important to expand on Dr. Lam’s article because the necessity for having this flexibility in our town financing may not have been sufficiently communicated. It is also important for town residents to understand that the situation the town finds itself in is not the result of fiscal mismanagement or irresponsibility, but rather the nature of Eastern vs. Western Mass. property values.

The issue at hand is the maximum allowable tax rate, not the actual taxes being raised. The tax rate is determined by dividing the total amount of revenue to be raised through taxes by the total fair market assessed value of properties in town. If the total assessed value of properties is low (or declines), the tax rate is high (or increases) even with no change in the total funds being raised.

A review of Department of Revenue data shows that since 2003, Longmeadow’s annual tax revenues have increased at the annual rate of 3.8 percent, one of, if not the, lowest annual rates of increase in the commonwealth. Annual tax revenue increases over that same time in Eastern Massachusetts towns have been higher than Longmeadow, some as high as 5.1 percent in Abington and 4.9 percent in Concord, all operating within the “limits” of proposition 2 ½. Even Amherst’s annual tax revenues have increased at an average rate of 4.8 percent per year over that same 17-year period. These increases occur because the law, though limiting tax increases on existing properties, allows unlimited total revenue increases through the addition of new properties to the tax base (new growth). As a fully built-out community, Longmeadow has little new taxable properties, a factor that has resulted in our overall spending growth being among the lowest in the commonwealth.

It is important that the timing and reason behind our warrant article proposal are clear. Under the current law, once the town of Longmeadow reaches a tax rate of $25 per $1,000 of valuation, no amount of local intervention or override votes would allow taxation above that level. Even with no additional spending, if property values in Longmeadow were to decline as a result of market forces, the Prop 2 ½ tax ceiling would be reached and the town would be unable to raise and appropriate funds to meet the service levels expected by residents, and might even need to cut services.

This tax ceiling issue has been on our radar for some time, but the COVID-19 pandemic has changed the possible timing of the town reaching that tax ceiling, timing that would be accelerated by a recession that reduces property values. With Longmeadow already near the $25 per $1,000 value tax ceiling allowed by Proposition 2-1/2, a reduction in property values would result in the town needing to at best freeze and at worst cut its budget to stay below that ceiling level. Nothing else would need to change, to impose that requirement - only a drop in the fair market value of homes in town.

The Tax Ceiling Task Force has been looking into doing things to delay, or even prevent, the town from reaching that $25 tax cap ceiling. As Dr. Lam pointed out in his article, taxes have been increased at less than the maximum allowable 2-1/2 percent last year and this year. Other actions include lowering the cost of providing town services (we recently purchased our street lights and are changing out the bulbs to high efficiency LEDs - an action that will save us $350,000 per year), providing new sources of income (developing town properties to give new tax revenue).   Moving expenses from the tax base to a fee-based system (stormwater utility) delays the date the town hits the tax ceiling, but doesn’t save residents any money.

The issue is that 85 percent of our $70 million annual town budget is the cost of employees - with 70 percent or so going to the schools either directly or through benefits to school employees. With the cost of our employees going up 2 ½ percent per year, our town budget must go up by $1.4 to $1.7 million per year just to keep the same people doing the same things. Medical benefit expenses for town employees increase 7 percent each year and retirement costs are scheduled to increase 8 percent per year for the foreseeable future. New tax revenue from developing the water tower property would bring in $250,000 to $400,000 in new tax revenue. Moving trash collection from taxes to fees reduces our tax burden by $500,000. The tax ceiling task force considered five or six actions that together would delay the date the town hit the tax ceiling by at most two years. When this review of actions the town could take to prevent the town from reaching the tax ceiling was complete, it was clear that none of those actions achieved a lasting impact.

Three months ago there were a number of people who believed that property values would be going up in the next few years and with the few actions we planned on taking, the town would not be likely to reach the $25 per $1,000 value tax ceiling. But now, that thinking is problematic, because even a slight reduction in property values would require cuts to the budget (services) offered by the town.

So the answer to this potential threat from reduced property values was as follows:

The Mass General Law called Proposition 2 1/2 was enacted in 1983, back when tax rates were $8 per $1,000 value and everyone figured the values of properties would go up and keep tax rates low. No one ever envisioned a tax rate anywhere near $25/$1,000 value. In the eastern part of the state that’s what happened. Most towns in Eastern Mass, for example, have been increasing their spending by over 4 percent per year but their tax rates are less than $15 / $1,000. Longmeadow, whose spending has gone up far less over the past 37 years finds itself with a tax rate of $24.21 (more when “exempted” items like school bonds are included). Eighteen of the top 25 tax rates in the commonwealth are all in towns in Western Mass where the increase in property values have not kept up with the cost of living over the past 37 years.

 The development and submission of Warrant Article 14 of the 2020 Annual Town Meeting asks the state legislature to allow the town to vote to exempt itself from the $25 tax rate ceiling. It would not exempt the town from the limit of no more than a 2 ½ percent tax rate increase from one year to the next. If the town meeting approves this warrant article, and if the state Legislature passes the “home rule exemption,” our Town Meeting would still have to vote (2/3 majority) to eliminate the tax ceiling and that vote would need to be ratified through a town-wide election. Our best guess is that with the COVID-19 situation it’s likely to take the state legislature two years to pass a Home Rule exemption, and it would then take the town at least a year to pass this at a town meeting and then a subsequent town-wide referendum. So, under the best of circumstances, we’ll be living under the current $25 tax ceiling cap for at least a couple of more years. Again, the request in Article 14 of the Town Meeting Warrant is to ask the legislature to give us the future option of exempting ourselves from the tax ceiling cap, it does not in itself exempt us from that ceiling.

Not only will town residents get two chances (a future town meeting and a referendum) to decline the exemption from the $25/$1,000 tax ceiling that may be authorized by the legislature, but they also get to vote on the budget each year, so if costs are going up more than they want, they can vote down the budget. Without this option to choose to exceed the $25 tax cap ceiling of Proposition 2 ½, the town’s only alternative will be to freeze our town budgets each year – and cut the ongoing services to both schools and our general government (including the DPW, Parks and Recreation and the Adult Department) while we pay the increased mandated costs for health care, pensions, and other employee benefits. We do not want to be in a position where we don’t have options, so Warrant Article 14 is “planning ahead” to give the town residents options if they choose to take them three years from now.

I understand that no one wants their taxes to go up, but the residents of Longmeadow have previously demonstrated they want to maintain services at current levels. We like the library, we like the Adult Center, and we strongly support the schools. To freeze our budget because we reached a tax rate ceiling set in 1983 would impact the quality of life and level of services we provide our residents. Our rate of spending increase has been among the lowest in the state over the past 37 years, but because the rate of increase in our property values is also among the lowest in the state, we find ourselves facing this $25 tax ceiling cap.

I urge you to support the passage of Warrant Article 14 to allow Longmeadow’s residents the future flexibility to maintain our services and schools. There would be no greater negative impact on property values in Longmeadow than to enter a downward spiral of services and programs based on a tax ceiling arbitrarily chosen in 1983.

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