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. Our Select Board 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.
Sunday, March 30, 2008
Revenue and fiscal health
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27 comments:
The DOR specifically states that BOTH revenues and expenditures need to change to address structural deficit. It seems Kathleen is among many who understand the root cause of our budget woes, and it's you who doesn't.
If you keep insisting the expenditure side can undergo more substantial changes, why do you keep insisting one override after another is in store for us if we pass this one to retain our level of town services while we continue to implement more change?
This override is adding more salaries. We have not addressed the fundamental problem of what salaries/benefits are doing to our budget. We cannot sustain the employees we already have. Has anyone mentioned what has been done to address compensation for these new people? Do we have a pay schedule/scale in place? The last I heard the personnel board was working on it. The town has refused to admit that employee compensation is killing us. In fact they had Michael Gagne at a SB meeting defending and trying to justify this very issue. Also what about pensions? Has this been addressed? From what I understand our pension liability for the town side is 20 million which has to be funded by FY13. Where is that money going to come from? This is going to be the town's next crisis and the taxpayers are going to have to pony up once again. I understand there are some costs beyond our control but not as many as we are being led to believe. So before I vote to add more salaries and compensation, I want to see a real effort from the town and a dollar amount for what the town has saved the taxpayer. In my opinion the progress in this area has been lacking and what is really disturbing is the refusal to admit there is even a problem. Anyone working in the private sector knows better.
Let's see, I work in the famous private sector and I recognize a bargain when I see it. I also recognize what the elimination of vital town personnel will do to our town. I also recognize that the people that I hire need a high quality education and that does not come cheaply as much as you want me to belive that. The bargain is the price of the override and this private businessman is voting yes on all questions.
Bill, Will you answer the first post?
I have said that the town needs an override but must carefully consider how any override affects our future course. I have said we need to prioritize spending and spend on the highest priorities and hold steady cut or eliminate the lowest.
If I thought that the town would implement changes, I wouldn't be running. Instead, I see our town administrators standing before the Select Board talking about the number of positions unfilled in the town. Those positions are not unfilled, they have been eliminated. These characterizations go unchallenged by the board. That kind of thinking has to change and I want to lead the way in doing it.
My thoughts on the current override questions can be found here
While we are in this discussion, I have some questions for you as well. Do you think that being critical of failures to plan and act will somehow cause the override questions to fail? I think just the opposite. Without a thorough discussion of the causes and remedies for our financial situation, the voters are less likely to vote for a tax increase in my view. What concrete, quantifiable steps have been taken to reduce the growth of expense? It's a structural deficit and the structure must change to fix that, what plans have been made in that regard? I haven't seen anything except future promises to do something. Even if contracts are not up yet, plans can be drawn up to change the structure ahead of that. Has that been done?
Bill it seems to me that if you cannot name some of the cuts and changes made in the last 3,4 or more years you are entering the "game" a little late and with not much information. Many cuts to programs and personnel have been made and this override will not restore most. If you don't know right now 3-5 concrete actions you can and will take as selectman to address the revenue/spending imbalance, then you are not ready to join our current board.
It seems you have a different definition of "structural deficit" than what was provided by the DOR. They clarified a "structural deficit" requires change to both revenues and expenditures. Are you assigning a different meaning to the terminology?
Regarding planning and action. I think you are misrepresenting both in an attempt to influence the vote on some override questions and to get yourself elected. More changes are pending and require planning. Action has been taken to implement the process. I feel you misrepresent that.
If you hadn't shown such disrepect in this regard, I would have considered you more as a candidate.
I have heard the cuts being made if the override fails. The DPW will have 7 workers left, 3 in the office, 4 on the road. Not many. Then how come we are keeping 4 engineers to inspect their work? We are eliminating the 2 non-seasonal employees in the park dept. but keeping the administrator. Who will do the work? Does this make sense to anyone? Is this a plan? How about consolidating the park dept. with the DPW and eliminating a supervisor? Does that make any sense? I have complete faith that Bill Trimble will consider this kind of plan versus keeping administration and laying off the people who really do the work.
I am talking about the cuts that have been made. You all talk as if the town has been twiddling its thumbs for years and continue to misrepresent the facts.
Do you mean the streelights? The difference here is that Bill readily admits we will need some sort of an override. He also believes that there are more things that can be done other than going to the taxpayers every few years for more and more money. His opponenet believes there has already been progress in this area. I have only seen an unwillingness by the SB to view our town in a realistic manner. Everything is being run efficiently, everything has cost saving measures in place, no one is being overpaid or overcompensated, etc. I have not seen one step taken to downsize management or restructure departments. Why wasn't any of this done after last year's override failure? Why are they always dragging their feet? They just wait until they can get the next override on the ballot and then tell us how bad everything is. Please tell us in specifics what has been done, not what they are going to do.
Great article in the Boston Herald:
http://bostonherald.com/news/opinion/columnists/view.bg?articleid=1083785
Homeowners taken for an override
by Margery Eagan
Sunday, March 30, 2008
Vote for change by voting for Bill Trimble!
On the override, vote no to give taxpayers more time to create efficiency, accountability, and transparency. As recently reported in the S-T, receivership is NOT imminent. We have more time to get the government WE WANT!
anonymous, Just read the article in the Boston Globe, "Homeowners taken for an override". It is a great article. I have no problem fulfilling our contractual obligations but what is being done to change things in the future, especially regarding things like pensions? Do we have double dippers in Dartmouth? I hear that the ex-athletic director has received compensation from the school department since he retired. Is this true?
Bill, When you stated "It's a structural deficit and the structure must change to fix that", you revealed a lack of understanding of what the DOR clarified was meant by the term "structural deficit". It's misstatements like these that mislead the public.
Mr. Lynch is employed by the school department to work with at risk children. His job has absolutely nothing to do with athletics. It has to do with lowering the drop out rate which can be directly attributed to his great work. Another example of bad rumours that are untrue, but don't take my word for it please call the school department and ask for yourself.
Anonymous, Does Mr. Lynch receive his full retirement on top of what he receives for the work that he has been hired to do now? Just trying to clear up the rumors.
Wally, again why don't you contact the school department and ask for yourself. But in the meantime why don't you check out the dropout rates on the DOE web site http://profiles.doe.mass.edu/indicators.aspx Here are a few for our area....Dartmouth 2.3, Westport 4.4, New Bedford 8.3, Fairhaven 3.6.
An anonymous comment has questioned me about the term "structural deficit" and now feels I am misleading people on its meaning. I think the term is being used to describe the disparity between the rates of growth of spending and revenue. I have posted above that such a disparity cannot be addressed by raising revenue via 2-1/2 overrides alone. The rate of growth of expense must be reduced to within the rate of growth of expense. That will require changes to the structure of town government in my opinion. If you have a different interpretation of the term "structural deficit", please state what it is and we can discuss it.
wally does not care about the facts. wally, like Barry and the rest of the CFRG like to throw various innuendo out there and figure that will stick in people's mind rather than the cold hard facts.
BillT - what's happening to threads these days, more and more are appearing and then disappearing. What gives?
Vote for Bill T. and you will get honesty and integrity. He's not a politician who tells you what you want to hear....like some others....
He is willing to tell you what you might not want to hear...the truth!
He is running so that he can help the town during this difficult time. He has nothing waiting in the wings in case he doesn't win. He will still be an active town meeting member.
C'mon - not telling you what you want to hear! Please. Who does'nt want to hear "I'll keep your taxes low. Schools should only get the basics or it'll cost you more money, I'll work to keep the cost as cheap as allowed by law, our library is not a priority so I can't support that question , it'll save you some more money"
That's the stuf most people want to hear as opposed to 'Support your town, it will cost you a few buck (less than a dollar a day)but you can do it"
Easy way out for BillT.
The DOR clarified the meaning of "structural deficit" in their report as I mentioned in an earlier post. Why haven't you referred to the DOR report for this clarification instead of applying your own interpretation of what you think it means?
Last question was for Bill.
From the DOR report,
While the factors outlined above explain cost pressures and decisions that contribute to the
override amount, to fully appreciate the magnitude of the town’s fiscal issues, it may be helpful to define structural deficit. A structural deficit occurs when recurring expenditure needs exceed recurring revenue sources.
Link to the report here
This sentence is in my opinion equivalent to my statement that the rate of growth of expense exceeded the rate of growth of revenue.
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