For a few years, the Select Board and Advisory Committee have warned that the Town would soon require a Proposition 2½ Override just to fund the Town’s general operations. They managed to avoid the issue over the past few years. But early this month, Select Board Chair Kathy Cook said the time is “here”. She believes they can’t avoid it for the next fiscal year’s budget and several to follow.
As they head into the new budget season, Cook, the board, and members of Advisory are starting to discuss what strategy to take for dealing with the “levy capacity” issue and getting approvals needed from voters.
For those unfamiliar — the levy is the amount of revenue the Town can raise through real estate and personal property taxes. Under the Proposition 2½ measure passed by Mass voters many years ago, Towns are capped at a 2.5% for the year over year levy increase —after “new growth revenue” and deducting the cost of “excluded debt” payments that voters previously approved. (You can read more in the state’s primer here.)
But Town officials in Southborough (and across many communities) complain that the cap is too low these days. They point to increasing expenses for level services (and employee benefits), burdens for financing future employee pensions and benefits, and state aid that Select Board members assert don’t keep up with inflation.
Recently, Cook and the Finance team met with Southborough’s DOR (Mass Dept of Revenue) representative, Andrew Nelson. The Chair relayed to the Select Board that Nelson recommended asking voters to approve a blanket override large enough to cover the next five years.
Cook suggested that, this spring, they might raise the levy ceiling. (She gave a preliminary projection of about $2Million for FY28 or a total $10 Million for 5 years. But she wasn’t ready to be held to that figure yet.)
Raising the levy capacity would require 2/3 approval by Town Meeting, and a ballot approval. (The ask would be separate from any Article that might also ask for a debt exclusion for a project at Neary School.)
Even if a 5 year increase was approved, each year, Town Meetings would still control the budgets determining the tax increases for that fiscal year. But for years 2-5, the override wouldn’t have to be approved through a ballot question (and a 2/3 Town Meeting vote).
Vice Chair Andrew Pfaff described that each year, the Town’s budget would “eat away” at the approved excess levy capacity.
Member Sam Stivers, who serves as the board’s designee on the MetroWest Regional Collaborative, said that at a recent meeting many area Towns were discussing taking the same approach.
According to Cook, Nelson also advised to not link the override to a specific budget. The strategy was successful in passing an override in Holden, where he lives. Cook explained:
different constituencies put signs in the yard saying “Support the Fire Department”, “Support the Police Department”, “Support the Schools” if that’s what your thing was.
Member Tim Fling expressed concern about the track for projected tax increases that the override could allow — especially if a Neary project also adds to tax bills.
Members discussed asking departments to present two budgets. The preparation would be to show voters what the budget impact would be if an override doesn’t get passed.
Cook planned to invite Nelson to speak with the entire board on August 11th. She also invited the Advisory Committee, so they could begin jointly discussing a strategy.
At this week’s Advisory Committee, Chair Marci Jones led a preliminary discussion on the topic. She described the potential levy cap increase of $10M to cover 5 years. She also talked about a potential one or three year override.
Member Al Hamilton (former Select Board member), said that he believes that Advisory should use the opportunity for some “tough love”:
I would like to see every department come up with a productivity improvement plan or an efficiency plan so that you know how do how do you deliver the same set of services for less
Member Tim Martel suggested that rather than raising the levy for unspecified funds, it should be linked to one of the burdensome long term costs the Town is grappling with, like OPEB (the non-pension benefit costs for future retirees).
Building on the idea, Hamilton suggested that instead of an override, the Town could look into borrowing money to pay for OPEB or future pensions. He believed that the debt interest may actually be lower than the the interest that would accrue in the pension fund.
Upon questioning as to why the Town hadn’t taken that approach, Hamilton acknowledged the issue of debt capacity given other projects the Town is looking at, like Neary School renovations.
To prepare for the joint meeting on the 11th, Jones planned to continue talking through their ideas and questions at Advisory’s August 5th meeting.
