I have stated what Dartmouth's fiscal problem is and defined the cause of that problem (link here). Now let's look at the possible solutions to matching the rates of growth of expenses to revenues. There are two obvious remedies to reconcile the rates of growth. The first is to increase the rate of growth of revenues, the second is to reduce the rate of growth of expenditures.
Let's examine the first option, increasing the rate of growth of revenue. The lion's share of revenue raised by the town comes from real property taxes on existing homes and businesses. The addition of new homes and businesses (new growth) adds to the amount of taxes which can be assessed. However, state law limits the growth of the existing property tax base to 2-1/2% per year. So the rate of revenue increase is limited to 2-1/2% per year plus the amount of new growth. New growth revenue is added on top of the 2-1/2% increase of the existing tax base. It is important to note that the following year, revenue from properties that had been new growth are now included in the tax base and grows at 2-1/2% per year. In order to have and sustain a higher rate of revenue growth, the town must continually add more and more homes and businesses (or properties with higher and higher valuation). Dartmouth has seen revenue growth rates in the 5-7% range in the past but that rate of growth has slowed as the available buildable area is used up and the national economy slows. While the rate of new construction may pick up again in the future, it is difficult to predict the amount and timing of that increase. The town residents have also shown little interest in adopting policies to increase the amount of new growth.
Another means to increase revenue growth rate is for the voters to approve an override of the 2-1/2% provision of the state statute. This override vote is required to be a dollar amount that is added to the tax base. The dollar amount of the override is permanent. However once that dollar amount is added via an override, it also grows at only 2-1/2% per year. So you can get a one year increase in the rate of revenue growth by approving an override, but the next year you are back to 2-1/2%.
As you can see, the avenues available to increase the property tax revenue growth rate beyond 2-1/2% are to pass serial overrides or aggressively promote new growth in the town. The townspeople have shown little enthusiasm for overrides or increased growth, so I submit that increasing the rate of revenue growth is not a viable option for curing our fiscal crisis.
On a final note, it seems that some on our Select Board do not understand the root cause of our budget woes. At the last Select Board meeting, the chair person is quoted as stating, "We have a revenue problem". Link here to Chronicle article.
As I showed above and in the last paragraph of this post, increased revenue via an override is a short term solution. If a differential in the rates of spending and revenue exist and it does, expenses quickly overtake an override increase amount. Rather we need to examine and change the rate of growth of expenses to return to fiscal health. Our ability to change the rate of growth of revenue is limited as I have just shown. In a upcoming post, I will look at ways that expenditure growth rate can be changed.
As always, let me know if you find fault in my analysis or think that I've missed other ways to change the rate of revenue growth. Click on comments and have a go.
UPDATE I edited this post for clarity. The edits are in italics above.
Friday, February 1, 2008
"We have a revenue problem" ??????????
Subscribe to:
Post Comments (Atom)
Posts
20 comments:
Bill, You information is incorrect. A proposition 2 1/2 override is a permanent increase in the tax levy by the dollar amount of the override. Yes, proposition does limit future taxation of the increased levy amount to 2 and 1/2 percent. Your statement that I said we have a revenue problem is correct, however I should have been more precise and stated we have a "lack of revenue problem". I question your sanity if you do not believe that our primary problem is that we do not have sufficient revenue to cover our basic services in town. We have cut expenses substantially, quite frankly there is no more fat to cut. We, the selectboard, have implemented numerous measures to address any and all cost savings measures. If you believe there is more fat to cut, please speak up!!! Perhaps you are the magician that the Town needs. If, in fact you watched the last meeting of the selectboard, what a shame that you failed to comment on the progress reported regarding the recommendations of the Fiscal Management Review. Perhaps you want to keep your audience in the dark regarding the real efforts that are being made by the leaders in our Town and the substantial changes as well. How could you watch this meeting and fail to perhaps comment on the serious public safety issue which is presented when the Chief of Police described the dessimation of his office from required cuts.... or the probably loss of certification of our library due to lack of funding. Interesting that in contrast to these very serious issues you must have witnessed being addressed at the meeting, that you would select a few words stated by the Chair as your focus and what you drew from the meeting.
How petty and small when we really have other tremendous problems confronting us.
Kathleen, Did you read the articles from the Vineyard Gazette that are posted on the "take it for what it is" posting on this blog? It should provide some insight as to why I am so dissappointed with the select board's version of how well they have done complying with the DOR recommendations. Just a heads up-- those articles will be part of the CFRG presentation. The longer it takes to get on the agenda, the more info we compile. Also, any progress from the "newly recharged" personnel board yet? I didn't think so. Remember, personnel is 70% of our budget.
Kathleen, I believe that I did state that override money is permanent.
"This override vote is required to be a dollar amount that is added to the tax base."
Perhaps it isn't clear in that statement that the dollar amount added is permanent and I will amend my post to clarify that. The important point here is that the amount added via an override grows at the 2-1/2% rate after the first year. But in any case, I will edit the original post to make that clear.
I had addressed the issues brought up by the chief and library director previously in the comments of this post. Take a look and leave a comment if you like. I felt I addressed it adequately there.
The point I am making in this post is that our fiscal problems cannot be addressed on the revenue side without serial overrides or an aggressive campaign to bring new growth to town. This reason for this is that the rates of growth of expenditures and revenue are out of balance. Do you agree with that analysis?
I am gathering my thoughts to compose a post about the ways I see that our budget shortfalls can be addressed on the expenditure side. I should post it soon, so check back in a few days and I should have it up for comment.
Barry,the gist of the articles you directed me to reveal that the executive administer of the community overstepped his or her bounds by entering into contracts without the approval of the Board. However, I will say the Selectboard has adopted the policy expressed by the DOR that personal contracts be used in the future for limited positions. For example, the first contract that has come up was the Veteran's Agent, and despite his excellent service to the Town, the Board could not extend a contract to him due to this policy. The problem is that the saving to be had in the analysis is not as simplistic as you would have the reader believe. For example, our by laws require that if the employee does not have a contract, he or she is entitled to routine step increases which at times will render the Town paying more for this employee that if he or she had a contract of employment. There are times that this policy will be contrary to our objective of saving money for the Town which is this Selectboard's primary goal. The by law can only be changed by a vote at town meeting. We are already exploring placing a change in the by law at the next town meeting. Additionally, we as a Town are subject to the collective bargaining process which requires us to bargain any changes with many of the employees in the Town. In fact, if you reviewed the DOR report, they commented that any change will be subject to the collective bargaining process. I can assure you that we are exploring every opportunity for cost savings to the Town, including the area of personnel. I look forward to your presentation but am hopeful that you will not mislead the public with misinformation and will include a more complex analysis of the issue. The Selectboard is open to any ideas for savings and if you have discovered any additional areas for improvement that have not already been explored, I can assure you we will investigate and act upon them. In regard to your comment on the Personnel Board, we have empowered them to act. Certainly you cannot be faulting the Board for re-invigorated the Personnel Board to scrutinize any and all Town contracts with the goal of cost savings for the Town? Additionally, I am sure you are aware that the Selectboard has no authority over the School employment contracts which comprise a much greater percentage of the Town budget than the employment costs on the Town-side.
Kathleen, The DOR recommended that management and supervisory personnel be given single year contracts based upon appropriation by the Town Meeting.
As a rule, individual employment contracts are limited to one year and cannot include any special fringe benefits not otherwise available to other employees. The reason is that appropriations for these operating expenses are made annually and no binding contracts can be made in excess of available appropriations.DOR REPORT RECOMMENDATION #7
We would have complete control of the salary offered every year. No one is talking about represented employees here.
Save money because they wouldn't get step increases? The harbor master is already at the top rate and the paralegal is making $10K more than the NU10 class as the positions are listed, according to the bylaw.
The town pays $2 million for 24 personal contracts and you start with the veterans agent who makes $47K.
The DOR also recommended that no benefits be allowed that were not available to all employees. Will the Select Board adopt that policy?
Kathleen, Regarding the articles in the Vineyard Gazette. I don't wish to debate the pros and cons of step increases vs. personal contracts. It is obvious we have differing views. What I would like to point out is the end result of the controversy. I commend the SB of Oak Bluffs for the actions they took after this issue was brought to light. They agreed to terminate all personal contracts at the end of the fiscal year, draft a standard contract for all employees, pay employees in accordance with town personnel bylaws, make benefits uniform for all contracts, draft a new contract for town administrator which could be used as a template for future agreements and have all future contracts fully vetted by selectmen in public and authorized by the entire board. Selectman Scott was quoted as saying "We want to start fresh. Everything in the future will be right out in the open so everyone knows what is happening". I have heard a lot of talk in Dartmouth regarding transparency. Wouldn't this be a good start towards that goal?
Kathleen, Re: DOR items that were reviewed with our Budget Director, many of the items he said he was 'happy' with. Isn't that like the fox guarding the hen house!!! I would like to see a list of all cost savings that our Town Admin. has presented to the SB. The SB is not made up of experts in town management, but our Budget Director and Town Admin. should be! Each item with amount saved should be published on the town web site , S-Times and Chronicle.
Kathleen,
I want to tell you that I respect you for posting on this blog. This personal contract dialogue is very constructive. Regarding the Oak Bluffs situation, their exec. administrator negotiated contracts on her own, which is an even worse situation than we have. However, the way I read the article, the town itself should not be entering into many of these contracts even with select board approval. Here are two quotes, "the town did not have legal authority to award personal service contracts and special one-time bonuses to several town employees over the past few years." "While the town has a total of 16 employees with personal service contracts,Mr. Rappaport said state law allows only four positions to hold such agreements:town administrator,finance director,police chief and fire chief. The town librarian can also receive a contract if it is approved by the library board of trustees." Also, you must admit that Bill has a good point about the paralegal. In the Dartmouth personnel bylaws the position is assigned to the non-union pay schedule as grade 10. The top step pay at level ten is approximately $10,000 less than we are paying her. It's true. I looked it up. The harbormaster is also assigned to this grade. We are paying him the highest amount possible at this grade. Don't hold me to this to the dollar because I don't have the pay schedule in front of me but I am sure it is accurate enough for the purpose of debate. Greg Lynam brought up the point at the finance comm. meeting thursday that when people are in a pay schedule with step increases combined with cola increases it becomes an increase that is way beyond the number that our revenue increases. This is true,however,if we are going to create a new pay schedule for these people then can't we put their current salaries as the amount of the highest step? Problem solved? When they are replaced the new person would start at a much lower rate. Or, as Diane Gilbert said at that meeting,we could have a salary range and only give raises beyond cola on merit. This particular idea worries me a little because when nobody is watching the hen house, these merit raises may flow too freely. We are trying to get a copy of the Oak Bluffs legal opinion about the legality of these contracts. If we have it in hand in time, we will include it in our presentation.
Political activism is a fun hobby don’t you think? Clearly the Walkers subscribe to this type leisure activity. After all Bill-T they make up 50% of your audience here. So please don’t censor my comments, I’m not picking on them it’s just an observation. To Barry I am told you run a successful cabinet shop. Am I to assume you never pass along cost increases to your customers in order to provide the same level of products and services you’re famously noted for? When fuel cost rises, material cost skyrocket and insurance premiums threaten to break the bank, all items out of your control, how do you manage those costs? Do you change the quality of products you provide or absorb the increases? Add to this scenario a fictitious consumer governing board overseeing every minuscule detail of your operations. Going painstakingly through your books questioning every budget line item, questioning whether or not you should use dovetail or lap joints. I ask you how long you would be able to stay in business. Running our town is not a whole lot different than running your business with one great exception; you don’t have 30k bosses continually giving you their opinion. You see where I’m coming from? Anyone can simply cut and slash budgets. Anyone can stand on the sidelines and point figures at our leadership. There’s no courage in doing that. Many of the town’s fix costs are going up at no fault of government. If you increase growth you also increase expenses. If inflation rises at a higher rate than 2.5% then you are steady marching towards a revenue crisis. It’s really that simple. Stabilizing the base, which and over ride will do gives the town a chance to preserve those things we love about Dartmouth. Yes we need to continually improve how it is managed but we need to do it in a constructive way. Barry you will be glad to know that I prefer the fine quality and craftsmanship of your cabinet products and will never trade it in for an Ikea counter top. Let’s value the quality of Dartmouth before it becomes to costly to every restore its beauty and charm.
Kali,
I consider my political activism to be an act of public service. I receive no compensation just as the select board doesn't(excepting health insurance.) As far as whether or not I use dovetail joinery or lap joints in my cabinet business, I use both. It depends on what my customer is willing to pay for. The taxpaying customers of Dartmouth voted for lap joints so I would suggest that our elected leaders use them. For the record, I have never had a call back for one of my drawers with lap joint construction. In fact,the custom kitchen in my own home and that of many luxury waterfront homes of my clients, have lap joints.
Regarding constructive manner of improving the way our town does business, I think the discussion of personal contracts on this blog have been just that. It seems to me that making sure we stay within the bounds of the law on this issue is not unreasonable. Since it is a legal issue, it is also not unreasonable to expect the two lawyers on the board to take the lead in this matter. I am not pointing fingers here but as facts come to light we need to make corrections.
As far as fixed rising costs, I would suggest that any override proposal address that issue only and not include anything that would add to this structural problem.
I also believe that our priorities need to be addressed. Girl Power and Banana Splits or an adequate number of patrolmen on duty?
Barry,
In regard to your point that there will be cost savings by not extending personal service contracts, I agree as I stated in my comment, the Board committed to this concept many, many months ago. The point is not new or unique at this point, it is done. Many months ago the Board also committed that only high level positions would receive contracts in the future, so again this is not a new concept and we have already embraced it. The idea of voiding contracts which are outstanding is a bit more complicated, but I look forward to discussing the issue at the meeting. Your presentation, to be accurate, must address the collective bargaining process and your suggestions for making the changes you propose in the confines of the process. If your research demonstrates possibilities that we have not explored, I can assure you we will explore all cost saving possibilities for the Town.
Additionally, your mention of Gregg's name is interesting. I agree that Mr. Lynam (as well as my Board), has embraced the concept of not extending the personal service contract, however recently when the request for an IT employee for the police department was brought before the board, it was Gregg who raised the point that perhaps extending a personal service contract to this gentlemen would cost the Town less than if the Town were not to extend the contract and the man be subject to the step system in place.
In regard to Diane's comment, the problem is, in the past, although the raises are supposed to be merit based, they have automatically been granted so I too have a concern with the proposal which will need to be fine tuned to provide cost savings to the Town.
FYI Barry, the Selectboard members receive no compensation for their service, NOR DO THEY RECEIVE HEALTH benefits as you represented.
Barry, you didn't answer my question. When your costs go up do you pass it onto your customers or instead provide a less quality product?
Kali,
explain to me how our paralegal is making $10k more than allowed per our personnel by-laws and I'll give you some lessons on how I run my business.
To the Select Board members commenting here. I still have not had my question from the beginning answered.
Our fiscal problems cannot be addressed on the revenue side without serial overrides or an aggressive campaign to bring new growth to town. The reason for this is that the rates of growth of expenditures and revenue are out of balance. Do you agree with that analysis?
Bill,
Our primary fiscal problems are due to our inability to raise revenue each year of more than 2 1/2 percent to meet expenses which are rising more than 2 1/2 percent each year. This problem is State-wide and if it hasn't already, will effect all communities in the State of Massachusetts. In addition to this problems,our ability to raise revenue through new growth has leveled off. Your statement regarding courting new growth lacks the understanding that with this new growth will come increased expenditure and costs which we will still have to deal with. Additionally, the new growth you are referring to would be primarily new residential growth, and at least from my discussion with residents, most are concerned regarding the over-development of the Town already.
Along with the many other measures the Selectboard has taken to deal with this financial crises, the Selectboard and Finance Committee have worked diligently to revamp how the financial business of the Town is conducted. One of these principles adopted by the Selectboard and the Finance Committee is to a more forward looking process of budgeting, looking at our projected revenue for years to come and bringing our projected expenditures in line with what that revenue will be. The problem is, under this analysis, and after cutting all that we possibly can cut, what will be reduced are some of the fundamental services the Town has historically offered. So, absent some intervention from the State to assist all Towns dealing with this financial crises, it will be up to the voter's in the Town to determine what services they would like to fund and what type of community they desire in the future.
I would like to ask Kathleen, if the select board would be better able to control expenses if they had oversight over the school committee ? If so why not ask for a change to the Town Charter to accomplish this ?
Bravo, Kathleen! You have nailed it with your statement, "The problem is, under this analysis, and after cutting all that we possibly can cut, what will be reduced are some of the fundamental services the Town has historically offered.
Now we need to set the priorities for what we will fund first and get to work on cutting the services with the lowest priority. We also need to let the townspeople know what the situation is in clear, unambiguous terms. The Finance Committee, Budget and Revenue Task Force, and others will be happy to lend credence to this effort, I am sure of that. Let's get started forthwith.
We cannot continue the current level of services without serial overrides or growth which the town doesn't want. The reverse budgeting process will aid us in our discussions by showing what we have to work with going forward. As the Select Board indicated at their last meeting, police have a higher priority than libraries. The Select Board needs to direct the administrators on the priorities to be considered in making these cuts. Let's focus on that in your Tuesday sessions. Will you commit to trying to move the board in that direction, Kathleen?
Mr Rodrigues,
State law requires that all spending for the school budget be controlled solely by the School Committee. The state has a formula which results in a number called Minimum Net School Spending (MNSS)that the town is required to turn over to the School Committee for their budget. Once appropriated, only the School Committee has any say in the way these funds are spent. We can spend more but never less that this MNSS. That said the MNSS for the schools does grow every year. It will grow a little less than 5% for next year. The school spending cannot be reduced as the spending mandated by law, but we can hold their funding to the MNSS increase.
Bill, does the school committee have to be elected ? Can it be appointed by the select board ?
Rick,
Mass General Law Chapter 41 section 1 and our town charter section 3-3 require the election of school committee members
Post a Comment