[Ed note: My Southborough accepts signed letters to the editor submitted by Southborough residents. Letters may be emailed to mysouthborough@gmail.com.
The following letter is from Michael Nute.]
To the Editor:
Nota Bene: This letter reflects only my own opinions and has not been vetted or approved by the Capital Improvement and Planning Committee, which I also sit on.
I would like to offer a counterpoint to Al Hamilton’s letter yesterday in the spirit of respectful dialogue. Al knows the town’s budget and financial history far better than I do so he may well take me to school on some of this, but here goes anyway…
The nature of free cash in the budget is a matter of interpretation. Historically the town has wound up with free cash in the range of about $1.5-2.0M (see page 8 of the 2024 MA DLS recommendations report for historical amounts). The fact that that balance was stable means the town more-or-less spent what it took in during those years. (As an aside, that same report recommended we stop budgeting our departments in such a way that this amount is so routinely “returned” year after year, because that sort of defeats the purpose of budgeting. But how departments plan and execute their spend is a different matter than whether the spend in total is too much or too little.)
Now, the last two years have seen an increase in that free cash amount from $1.6M to $2.3M and now evidently, as Al reports, to $3.2M. That does imply that there has been some surplus in those years, but only $700k and $900k respectively. The suggestion that the $3.2M represents “over-taxation” of 4.7% roundaboutly implies that taxes could be 4.7% lower from now on, but that misses the point that the $3.2M includes the subsidy from the previous year’s free cash that would then be missing next year. If you want to argue that we were over-taxed by $900k (1.3%), then okay, maybe, but even that is shortsighted.
A better way to look at it is that the free cash is as a stock rather than a flow; it’s actually part of the town’s financial reserve (see the second DLS recommendation on page 9 of that report). The town’s total financial reserve is the most recent free cash amount plus the Stabilization fund, which Al alluded to and is managed by Advisory and which has a balance of roughly $600k. At $3.2M in free cash, that gives us a total reserve of about $3.8M, which is 5.4% of our budget. As the DLS report points out, that number is comically low; at the time of their writing it was 4.97%, good for 5th lowest among towns in the state with an average closer to 20%.
So Al is right that our budgeting process needs to be fixed, that much is clear. But on balance, historically, the spending (though not the budgeting, for some reason) has reflected the revenue coming in pretty closely until the last two years when we’ve had a small surplus. But even if those are exactly matched and free cash settles to a smaller number, we can’t plan on covering shortfalls from the reserve fund until it actually has some real money in it. Just to repeat: the reserve fund is at 600k, roughly 1% of our budget, and a normal level is about 20%.
One last thing… On top of all that, we have consistently under-invested in capital items over the years, and there is a backlog. In January, CIPC met with the Select board and proposed a total of $1.7M of capital investments from the general fund (i.e. those that do not require bonding). That total is a material increase over prior years and yet is a pretty narrow list of investments representing basic needs for town services. In fact, two of the biggest items in that are overhauls, not replacements, of DPW trucks from 2004 and 2013, which I point out while the recent snowstorms are fresh in our minds. In addition, CIPC proposed several major items requiring bonding. This includes the Neary roof, which we have all seen, but also the Trottier roof (also at end of life) and the start of the $15M road maintenance project for example. Roofs on our schools and decent roads are hardly luxury items, but they will cost money and they will represent an increase in capital expenditures compared to the recent past.
So with all due and genuine respect, I don’t believe we are over-taxed. We have paid only what it costs to maintain the bare minimum level of services in the town while chronically deferring important maintenance and keeping our cash cushion thinner than almost every town in the state. As we move forward, we should plan to build a proper reserve fund and make long overdue capital investments, and if we do that we will likely find that unfortunately all along we have been under-taxed.
Michael Nute
49 Wildwood Dr.
Not over taxed???? When our tax rates continually go up and nothing is done to keep our facilities updated and roads in good repair! This town has been notorious for not fixing what needs to be fixed at the proper time. Time after time outside firms are hired to do studies on various proposals at crazy costs then nothing is done. A large majority of projects needed to be addressed should be studied by who has been hired and assigned to the area of responsibility . If they don’t have that ability why are they there! Also there is a serious need for an audit to be done on the town expenditures across the board! Quit raising our taxes without any real improvements being done!
Oh I forgot we voted last year in this state 72% for an audit but it has been denied time and time again?? Is that happening here and what does that tell you????
From one taxpayer to the town taxpayers: we are absolutely being overtaxed and have little to nothing to show for it – the more apt description is that we are being poorly managed, improperly managed, and under-managed, with NO ONE having a firm grasp or control over the $65m budget.
The point of the above letter to the editor, i.e. “undertaxed,” is understood. Yet the other side of this same coin is the following: the better description would be that there are numerous items NOT BAKED IN to the annual budget, but should be looked at more closely, including:
· Bad roads (don’t drive down Northborough Road if you want to keep your front end);
· A long list of under-funded capital needs (which is not a by-product of best practices, but of no apparent management at all);
· How do you allow a roof to fail and then come hand outstretched at the OVERUSED format of special town meeting (STM)?;
· DPW’s ENORMOUS wish list of capital items, some of which are being approved with no discussion whatsoever at Town Meeting;
· Watch out for the NOT discussed items, the underfunded unmentionables;
· ARE THERE LEAKS? In cash, receivables, payables, in the overall system of checks and balances and accountability? ABSOLUTELY, THERE HAVE BEEN a number of examples on the blog and in the press. Remember the person who stole almost ½ million dollars from “PETTY” cash to buy drugs? There obviously were missing checks and balances (pun intended) on that one. School budget officer sentenced to 2 years prison – My Southborough
· What about 3 bids on every contract to get the best, most cost-efficient deal, service or item on behalf of taxpayers? The $1.5m no-bid contract for the “Lynbrook Road” project (really the Tara Tower project) doesn’t apparently fall into that category. This was the “consent agenda” item at last spring’s town meeting that was approved with ZERO discussion. Just great.
· The town doesn’t even follow recommendations from the state (!!) from matching awarded contracts with actual follow through on the actual contracts / work / service done. In the SAME REPORT, take a look at the recent DEPARTMENT OF REVENUE calling out Southborough as ranked 5th lowest in reserves for municipalities in the state. See the following link:
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The salient takeaway is this: NO ONE IS DRIVING THE BUS. It’s all unaffordable and unsustainable. It’s out of control spending combined with a terrible lack of accountability. The town has to do a much better job at managing upcoming capital needs and DECREASING the current taxes.
Importantly, Boston and other municipalities are telling all departments TO BUDGET IN TARGETED DECREASES (Boston is 2%). A good number would be 10% decrease and hope for something less. That’s all you’re getting, that’s it for now. Spend how you may.
NO MORE TAX INCREASES UNTIL the entire big picture capital spending needs are better understood.
AUDIT TIME, big time – and implementation of best practices and controls. It is a reasonable thing to at least try to bridge the information gaps between budgeting / Advisory and actual spending. Look for the Citizen Warrant Petition at the spring Town Meeting that calls for a new finance / AUDIT committee. Hopefully, many good things can come from some well-deserved scrutiny via this warrant article.
I live in a small, very old house, with a very small yard. The taxes I pay are ridiculous.
Karen I’d love to go like furniture or clothes shopping with you some time. If you see a price in a store but you think it should cost half as much, do you give the owner a piece of your mind like this? By all means take the wheel if you think nobody is driving the bus.
This budget discussion is a complex, multi-layered onion that is difficult to address on this blog. This is a large $65m business, it is not personal. DIY is not how a professional addresses budgetary challenges. There has been waste and lack of accountability. As for staffing Advisory, the taxpayers hope for individuals whose circumstances allow them to spend the time, have previously sat on or run Boards, have served in a Treasurer position at some point or have some budgetary experience, and/or if lucky, find a retired candidate who may have run a business and has budget / cash flow experience and sinking fund / real estate experience.
The questions of the day are the following:
· How can Town Budgeting be improved;
· How can overall performance and coordination on spending be improved;
· How can the information gap between Advisory and Actual Spending be improved;
· How can the Town (and the bill payers, the taxpayers) get the best value for its buck and be most careful about spending. (This includes an awareness of Mass General Law on Procurement.)
· It makes sense to acknowledge that allowing a roof to fail doesn’t fall into “best practices” in budget management.
· There does need to be a re-examination and overhaul of the process. While I don’t completely agree with Mr. Hamilton’s view on reserves (it should be adequate and invested well in accordance with the law – and importantly, no matter how much you think you know, the following link is a helpful reminder to all of us), he is to be thanked for his transparency in highlighting the “unsustainable business model” and the somewhat shocking “competing fiefdoms” – which should be and must be addressed.
The following comprise a collection of good basic reminders to keep in mind currently:
Please see – and well worth the look — Building blocks of Municipal Finance and Best Practices:
Municipal Finance 101: Budgeting & Best Practices – Massachusetts Municipal Association (MMA)
Wishing for increases at inflation rate is not management; that’s kicking a can down a road. It is much harder to pro-actively manage cash flows and expenses during uncertain times, and that’s done through a keen awareness of the taxpayer base, implementing best practices in spending, and full accountability on how budgeted monies were actually spent. On the latter point, it would be a good idea at this time to have a new committee whose job it is specifically to bridge that informational gap between Advisory’s important role, contracting, and spending. Financial policies seem to be lacking, but they are very important in setting guidance and parameters for accountability and internal controls, complying with statutes, etc.
What are the consequences of NOT implementing best practices? Several towns in the area are facing significant budget deficits for the 2026 fiscal year (FY26), primarily driven by rising operational costs, high inflation, and constraints under Proposition 2½.
Based on reports for the upcoming fiscal year, the following towns are facing notable budget challenges:
· Grafton: Facing a projected $1.4 million to $1.8 million budget deficit, with a significant portion affecting the Grafton Public Schools, leading to potential override votes and school budget cuts.
· Grafton faces looming school budget cuts, override vote
FOR TAXPAYERS, here is an IMPORTANT and HELPFUL RESOURCE, well worth a look:
Microsoft Word – Citizens Guide to the Budget_2021
EXCERPT:
As the stewards of taxpayer dollars, the TOWN must be diligent about how it spends. Officials and Town Meeting Representatives must be aware of the residents’ ability and willingness to pay for services. If residents believe that the tax burden is already as much as they can bear and if the cost of services grows at a rate greater than the Town’s REVENUE STREAM (capped at 2.5% each year) then Town Officials will have to choose WHICH SERVICES to keep, and which must be scaled back or eliminated in order to balance the budget. Alternatively, the Town can raise additional operating revenue by a Proposition 2.5 override, which must be approved by the voters (Note: the override is permanent.) The choices we make today will also have an impact on FUTURE BUDGETS. For example: If the Public Works budgets are reduced to a level where the Town can no longer keep up parks, ROADS, sidewalks, water or sewer maintenance and repairs then we will be deferring the cost to maintain or upgrade these facilities on some future year’s budget.
The opposite is also true. The town must carefully consider adding any new services or programs to the budget because we may be obliging the community to continue these services in future years. It is also important for the Town to REPAY the money that the community has borrowed in the past, be careful about future borrowing, and maintain the Town’s savings accounts, i.e. reserves. The challenge in creating the budget each year is to carefully weigh what is needed to provide each service taking into account how much revenue can be expected and how much can be spent on each service the Town provides.
Mike
You bring up 3 important points
1. What is the proper level of Free Cash? The first thing to recognize is that our accounts do not include the “Free Cash” at the regional high school or other regional entities. So the Free Cash on the Towns’s books really only represents municipal operations and K-8 schools. My guess is that we should target 1-2 million as a reasonable range for free cash. Some positive Free Cash is required to keep our accounts from going negative. Some reform of how we budget the Reserve Fund can backstop the risks of a shortfall in any department.
2. Do we underfund our Capital Budgets? – Absolutely! – My my estimate the replacement cost of our buried infrastructure (roads, culverts, drainage, retention basins, and water lines) is on the order of ¼ of a Billion Dollars. Even with a very conservative deprecation life of 100 years we should be spending $2.5 million a year in capital maintenance on these items (the reality is much more). The same is true for our buildings. We don’t fund these accounts property in spite of having some of the highest property taxes in the Commonwealth is the result of our failure to address our outdated and inefficient organization.
3. What is the proper level of Financial Reserves? We have several “reserve accounts” Free Cash, the Reserve Fund, which is overseen by Advisory, and Stabilization. While the state would like us to have more in our Stabilization Fund we should treat this desire as somewhat self serving. We are told that the reason to have reserves is to weather an economic downturn or to support our bond rating. Neither of these claims hold up under close scrutiny.
While our personal or corporate finances do benefit from healthy reserves because of the possibility of revenue uncertainty, Town government is not subject to the same uncertainty. Local government can have exactly as much revenue as Town Meeting is prepared to authorize no more no less.
As for bond ratings we have been operating with modest reserves for close to 20 years and yet our rating has improved from AA to AAA. Why you ask? When we vote to borrow money we are really voting to place an assessment on all the taxable property in town (in effect a lein). As long as the value of the underlying property remains solid the risk of default is very low and that leads to improved ratings.
The Commonwealths desire for us to have higher reserves is really bureaucrats promulgating recommendations to protect bureaucrats and has little to do with actual finance. Moneys tucked away in a stabilization fund or other reserves represents taxes paid for which no valuable service can be identified or delivered.