Making Change Part 2: Direct Action

Influencing decisions made by public officials using letter-writing, email campaigns, phone calls, social media, and attending hearings and meetings are effective methods of achieving change. Direct action is perfect for making change at the local level, where those in charge are often more available and open to listening to their constituents.

Here in Shutesbury, direct action has resulted in positive change in two recent situations, thanks to the participation of many townsfolk.

The first example involved the Shutesbury Fire Department. On June 19, 2018, a post appeared on NextDoor Shutesbury (NDS) announcing the resignation of the Fire Chief and the entire force of firefighters due to stalled contract negotiations between the town and the Fire Chief. The post included a letter sent to the town’s Select Board reflecting rancorous discussions between the parties. The whole department vowed to resign along with the  Chief. 

It’s worth reviewing the NDS thread to see how quickly this issue became more than just a back-and-forth discussion on social media. While a few commenters defended the town’s contract negotiation process as sacrosanct and not up for debate, many more (including yours truly) recognized that a crisis was brewing. 

The issue appeared to be about $5,000 in pay, half of what the Chief requested to bring his salary in line with other contract employees in town. The thread hints at other, more political reasons for the town’s refusal to approve the contract, though they remained rumors and opinion.

Almost immediately, firefighters began circulating a Citizens’ Petition for a Special Town Meeting to discuss funding options for the Chief’s pay increase.

After contacting the Town Administrator and Select Board chair, we were also able to get the issue on the next Select Board meeting agenda. The June 26, 2018 Select Board meeting, held in the Elementary School’s gymnasium, was well attended. Many townspeople stepped up to the microphone to support the Fire Chief and to ask that negotiations continue to resolve the issues between the parties.

The issue continued to simmer on NDS as the Special Town Meeting, set for July 31, approached. Of the two articles on the warrant, the first spoke to the funding of the Fire Chief’s salary. The meeting was opened with the announcement that the parties had reached a settlement, and the Chief would be compensated at his requested rate.

This example is a melding of direct action and the use of a Citizens’ Petition that was propelled by local social media. I believe the ability to quickly communicate with others across town helped get the word out in a timely fashion and to get the required signatures on the petition. NextDoor Shutesbury also assisted with keeping the issue alive long enough to bring it to a satisfactory conclusion.

A more recent example is the vote on Article 2 at the June 12, 2021 Annual Town Meeting. The vote to support the Statutory Assessment Method of regional school funding translates into savings for Shutesbury, which will pay 3.9% less for its share of the regional school budget in fiscal year 2022 than it did in FY 2021.

In years past, Shutesbury was pressured by the other three towns in the regional school system--Amherst, Pelham, and Leverett--to follow the Alternative Assessment Method of funding, which put our town at a disadvantage since it was based upon student enrollment rather than each town’s wealth. Over the years, not using the Statutory Assessment Method has cost Shutesbury taxpayers in excess of $2,250,000.

The new formula changes each town’s contribution to 65% statutory and 35% alternative, a boon to Shutesbury, the least-wealthy of the four towns. This change would not have happened but for a grassroots effort by Shutesbury citizens, spearheaded by the Coalition for an Affordable Shutesbury. The group used an informational campaign to encourage residents to pressure their town leaders to embrace the concept and be more assertive during the four-town negotiations.

Though the change is in effect for fiscal year 2022, it is possible that continued pressure from taxpayers will be needed to extend the agreement beyond this contract year. Eventually, we may be able to push the current 65% of the regional school budget calculated as statutory up to 100%--the method already in use by 72% of Massachusetts regional school districts.

Making Change: The Citizens’ Petition

This year, Shutesbury’s Annual Town Meeting was somewhat troubling. As some voters approached the microphones in an attempt to modify budgetary line items, it became clear just how difficult it is to change warrant articles and budget items at town meetings.

One issue concerned an Expense Budget line item (#178) for $112,695 to be raised and moved to Capital Stabilization. The request by a voter was to instead transfer the same amount from Free Cash instead of raising it from taxpayers. This move would bolster Capital Stabilization by making a transfer from an account that was projected to have $696,000 left over if all warrant articles passed Town Meeting. 

It was decided by town officials and the moderator that the amendment could only ask that the amount in question be removed from the budget altogether. The reasoning was due to the significant amount of money involved; it was determined that voters not present at Town Meeting would be denied the opportunity to comment on the change. The amendment failed.

The second issue concerned warrant article number 5 which dealt with the Locks Pond Road culvert reconstruction. The proposed funding mix included money from the Capital Stabilization account, leftover funds from a state bridge grant, and taking a loan for $500,000. The article was changed at the last minute, however, as the town received a new, less expensive bid that would save $300,000.

The voter at the microphone said he had planned to propose an amendment that would turn the $500,000 loan into a free cash transfer. He now asked whether or not that could be done with the remaining $200,000. Again, it was determined that this could not be done. The article must be voted up or down, as presented. No nips and tucks allowed.

After complaints that the system seemed too rigid to enact any change by voters, the idea of a Citizens’ Initiative Petition was raised. The moderator noted that other Massachusetts towns have used this technique to good effect, but that Shutesbury does not tend to use it. At least two other commenters chimed in that the Citizens’ Petition route seemed like a winner.

What is a Citizens’ Petition for Town Meeting?

Voters may place articles on the Town Meeting warrant via a Citizens’ Petition as long as they deliver the articles before the Select Board closes the warrant. In Shutesbury, delivery must occur at least 45 days before Town Meeting.

For Annual Town Meeting, the petition must be signed by at least 10 registered voters who must state their place of residence, including street and number (if any). 

To add an article to a Special Town Meeting, the signatures of 100 voters or 10% of the total number of registered voters (whichever is fewer) is necessary. If citizens want to call a Special Town Meeting themselves, they will need the signatures and stated residences of 200 voters or 20% of the town’s registered voters--whichever is fewer--to do so. The Special Town Meeting must occur within 45 days after the petition is received.

Limits of Citizens’ Petitions

Though useful, Citizens’ Petitions cannot address issues in a warrant that has already closed. For the scenarios outlined from Shutesbury’s most recent Town Meeting, any petition should have been delivered by April 29 at the very latest. However, the warrants and budget documents were not uploaded to Shutesbury’s website until May 23.

To know as early as possible what might be on the warrant would necessitate attending every meeting of at least the Select Board and Finance Committees for several weeks or months ahead of Town Meeting. Even then, interested voters may not know the exact nature of the warrant articles that will eventually be approved for Town Meeting.

Is there a better way for citizens to have their needs and concerns addressed by town officials? Indeed, there is.

Direct action can let town leaders know quickly and efficiently when voters are dissatisfied with a situation or decision. In the next post, we’ll take a look at how townspeople can turn the tide by getting directly involved.

Are Shutesbury’s Taxes Too High?

The Covid-19 pandemic hit U.S. homeowners hard, spurring a 5.4% hike in property taxes from 2019 to 2020 when averaged throughout the country. Overall, single-family homeowners experienced the biggest increase in property taxes in four years.

At the same time, the housing market took off as interest rates stayed low and newly remote workers fled cities for suburban oases. 

Massachusetts’ home sales in 2020 were the highest seen since 2004—with a commensurate median sale price increase of 11.4%.

For Franklin County, median house prices jumped by 13.3%.

Property assessments rose around the state from calendar year 2019 to 2020 (fiscal years 2020 and 2021), with 333 municipalities reporting an increase in assessed values. For fiscal year 2022, assessments will likely rise even more.

Here in Shutesbury, both the tax rate and the single-family tax bill have increased steadily since 2012, except for fiscal year 2021. The percent of income townsfolk need to set aside to pay their property taxes hit a 10-year high of 24.3-% in 2015; this year, it sits at 21.1%. This year’s decrease is likely due to the town’s decision to use $220,000 of free cash funds to lower the tax rate (which was $24.04 in fiscal year 2020).

Still, Shutesbury’s average tax bill of $5,662 pales in comparison to that of Amherst ($8,190, 41.9% of income) and is lower than that of our most similar neighbor, Leverett ($6,368, 13.4% of income). Wendell’s tax bill is much lower ($4,288, 21.5% of income) while its tax rate is nearly $2.00 higher ($24.54 compared to Shutesbury’s $22.61).

Considering the restrictions imposed by Prop. 2 ½, Shutesbury’s tax rates over the past three years are getting uncomfortably close to $25/$1,000 of value ($24.04 in fiscal year 2020, the current year’s $22.61, and fiscal year 2022’s projected $23.68). 

Is using money from Free Cash a sustainable way to lower taxes in Shutesbury? How about—gasp—good old-fashioned belt-tightening? What about solar farms? Let’s take a look.

Free Cash

For fiscal year 2021, the Finance Committee supported using Free Cash to close possible budget shortfalls due to the pandemic emergency and to lower the tax rate. The original amount to be moved from Free Cash was $476,367, later adjusted to $220,000 when feared state funding cuts did not materialize. This had the effect of lowering our tax rate by approximately $1.00.

This transfer of Free Cash appears to be a one-time move prompted by the desire to give taxpayers some relief during a health emergency and fully fund the town budget in the face of economic uncertainty. In other words, the town does not seem inclined to use this tactic as a method of tax-rate control.

That’s a good thing since using Free Cash too often for this purpose would deplete our reserves. Currently, Shutesbury has approximately $1.3 million in Free Cash and several Capital Items on the warrant for Town Meeting—such as the school gym roof replacement and the replacement of a culvert on Locks Pond Road.

Therefore, Free Cash transfers are fine as an occasional way to decrease the tax rate but do not represent a sustainable method of keeping it low.

Reining in the Budget (Belt-Tightening)

Conservative spending by municipalities will result in a tighter budget, meaning less money will need to be raised by taxing property owners. While this notion sounds sensible and reasonable, fiscal conservatism has been problematic for Shutesbury.

As noted above, the reason for applying $220,000 to the budget for fiscal year 2021 was because a majority of the Finance Committee did not want to cut spending or decreased the budget, even during a crisis. A review of last year’s Town Meeting minutes shows an effort by a minority of FinCom members to trim the budget by amending five line items was a failure.

This year, voters could shave $0.50 from the tax rate and around $125.00 off the average property tax bill by eliminating $112,695 from the budget at Town Meeting. This amount, which represents the combined loan payments for a fire truck and dump truck, no longer belongs in the budget since the loans have been paid off. However, the town is still collecting the money and transferring it to the Capital Stabilization account, one of the town’s reserve accounts.

Shutesbury Town Meeting has a history of passing town budgets as presented, with very little discussion. Since controlling spending is a viable and practical approach to reduce a tax rate that is fast approaching the legal limit, this mindset is worth revisiting to ensure a healthy and sustainable financial future for our community.

Solar Farms

Solar farm developments can help reduce the tax rate through payment-in-lieu-of-taxes (PILOT), which compensate communities for lost tax revenue for tax-exempt property. Examples are state-owned land, tax-exempt organizations, and power generation entities like solar farms. Currently, Shutesbury expects a PILOT of $20,648 for fiscal year 2022 for state-owned lands and a PILOT payment of $86,304  ($76,804 plus $9,500 for batteries) for the 30-acre Wheelock solar farm.

The town and a Canadian energy company, Amp Energy, have held discussions regarding Amp’s desire to build five solar farms in Shutesbury on about 190 acres of land leased from W.D. Cowls. If $220,000 reduced the tax rate by approximately $1.00, the Wheelock tract drops the tax rate by about $0.39. Shutesbury’s Administrative Assessor submitted figures this past March for a possible Amp solar farm, indicating a decrease in the tax rate of $1.53 for a 37-megawatt facility and $1.83 for a 45 Mw facility. He notes that these numbers are based upon information provided to the town by Amp in a February email.

Whether this project becomes reality remains to be seen. Many townspeople have protested against the clear-cutting of such large swaths of Shutesbury’s forest land and note that the current bylaws prohibit solar farms larger than 15 acres. Amp’s discussions with the Select Board have included the company’s opinion that the town’s bylaw is too restrictive and that litigation on that subject is a real possibility—an attitude that does not bode well for Shutesbury and its taxpayers.

There are other concerns. The Massachusetts Office of the State Auditor has found that solar facility PILOTs are often much less beneficial to municipalities than they are to the solar companies. 

Confusing, outdated state laws regarding the taxation of solar farm equipment have led to many communities undervaluing these properties, to the detriment of the city or town. A 2014 decision from the Massachusetts Appellate Tax Board has created a tax loophole through which many developers have successfully avoided paying full or partial personal property taxes on their equipment.

As more solar farms become tax-exempt, PILOTs become more important. Since PILOT agreements are based on the valuation of the facility’s equipment, a town’s low estimate of a facility’s equipment value and the difficulty of estimating these values over contracts of 20 to 30 years will surely put municipalities at a disadvantage during negotiations on such agreements.

Funding Capital Projects: Borrowing v. Cash Reserves

 

Shutesbury has several capital funding projects on tap for the coming fiscal year. As taxpayers and voters, we will be called upon to approve the following items:

1. A new roof for the school gym;

2.  Improvements to the school’s heating and cooling system;

3.  The replacement of the Locks Pond Road culvert near the Lake Wyola dam.

Article 6 of the Annual Town Meeting Warrant proposes paying for the new roof with a transfer of up to $300,000 from Free Cash. Article 7 proposes transferring up to $17,000 from the Stabilization account to pay for the heating and cooling system (HVAC). The culvert project proposal involves using $250,000 from Capital Stabilization, leftover funds from a Municipal Small Bridge Program grant, and borrowing $500,000. The entire project is estimated to cost $1.1 million.

As the Finance Committee notes in its Fiscal Year 2022 Budget Report, the use of cash reserves on the Town Meeting warrant will, if passed, result in a decrease of 31% in Shutesbury’s reserves. 

Still, the amount remaining will be a substantial $1.52 million.

Knowing this, does it make sense for Shutesbury to borrow the $500,000 for the culvert when tapping reserves instead will still leave us with over $1 million in our rainy day funds?

The Finance Committee’s Plan

This very question was raised during the Finance Committee Budget Forum on the evening of June 1, 2021. FinCom member George Arvanitis was given the floor to explain how borrowing this money would benefit Shutesbury taxpayers.

While noting that the interest paid on the town’s cash reserves is minuscule, he pointed out that interest rates for borrowing are quite low as well—making borrowing an attractive option. He said FinCom is planning to borrow the $500,000 for a five-year term at a rate of 2.75%. Unlike consumer loans, municipal loans require equal parts of the principal to be paid off for each year of the loan term. This results in a large annual payment but ensures that the loan is paid off timely and represents an affordable way for cities and towns to borrow necessary funds.

Other questions and concerns were addressed by Mr. Arvanitis, specifically a fiscal year 2022 budget item for $112,695 (line 178 on the Expense Budget). This particular sum has been the subject of much debate and two separate threads on NextDoor Shutesbury. Mr. Arvanitis confirmed that this transfer to Capital Stabilization does indeed represent the sum of the payments of two paid-off loans, as some townspeople have alleged.

Instead of bowing to criticism regarding the continued budgeting for debts that no longer exist, Mr. Arvanitis took the position that this tactic was necessary. His immediate reason was that this amount will easily pay for the first year of the culvert loan. He also defended the action as a budgeting technique that helps keep Shutesbury’s tax rate stable--although, in reality, Shutesbury’s tax rate has risen for each of the last 10 years, with the exception of last year:

As Mr. Arvanitis explained, the FinCom decided, about 10 years ago, that eliminating swings in the tax rate was a priority. He mentioned two reasons for this. One had to do with the idea that it is easier for taxpayers to budget when they have bills that don’t vary much. The other reason was budgetary: the town could save money when expenses were lower, thereby eliminating the need to borrow or use overrides for large or unexpected expenses.

This sounds reasonable. Many households do this very thing, turning a former debt or expense into a vehicle for savings. As a personal finance budgeting technique, saving for a rainy day in this manner makes sense.

Municipal finance differs from personal finance in many ways, however. The town makes decisions using taxpayer money, so being open and transparent is important. The FinCom decided that the town would borrow $500,000 for the culvert project and also decided to maintain former debt payments as a way to pay the loan.

To be upfront with taxpayers, the Finance Committee should have represented the former debt as paid and included a new line item in the budget for the yearly servicing of the new loan. If they had done so, voters would know exactly what they would be voting for in Article 4 approving the multi-page spreadsheet known as the Town Budget.

I can understand why the town would prefer to take the tact they did. For one thing, voters will not see upfront the cost of the loan and so will be less apt to question how much this new debt would truly cost—or suggest alternatives like using cash reserves instead of taking out a loan.

Also, keeping reserves higher than recommended state officials suggest 3% to 5% of a municipality’s annual budget as a reasonable cash cushion—means the town likely won’t have to ask for override votes to fund future projects. 

In addition to being opaque and non-transparent, this method of budgeting is patronizing to the taxpayers. The town leaders seem to feel that voters would be unable to make prudent fiscal decisions if budget items were presented clearly. I don’t know about you, but I feel more than a little bit insulted.

The Cost of Borrowing

In a nutshell, here is what this new $500,000 loan will cost the taxpayers of Shutesbury:

$500,000 loan 2.75% interest rate x 5 years = $541,995.80. The total interest cost of borrowing is $41,995.80.

Less $250 earned interest on Free Cash = $541,745.80

Annual payment = $108,399.16. This will add approximately $0.48 to the tax rate and $120.12 to the annual average single-family tax bill every year for the next five years.

Less $50 earned interest on Free Cash = $108,349

That’s not a lot, but there is also the cost of the $112,695 which FinCom plans to use to pay the annual freight on the new loan. That amount will add $0.50 to the tax rate and about $125.00 to the average tax bill.

There’s nothing untoward about asking taxpayers to fund necessary repairs to existing infrastructure. As one of those taxpayers, I only ask that I be given all the information needed, in a clear and accurate format, to make an informed, fiscally responsible decision when these issues come up for a vote at Town Meeting.

Why Tax Rates Vary Across the State

Local property taxes represent the major funding source for Massachusetts cities and towns. Both tax rates and tax bills vary widely throughout the state. According to the latest information from the MA Department of Revenue, the winners for the category of highest and lowest tax rates are:

• Longmeadow, $24.74 and Gosnold, $2.72;

…while the biggest and smallest average single-family tax bills belong to:

• Weston, $21,648, and Hancock, $764 (the tax rate is also the third-lowest at $2.98).

What accounts for these huge disparities? Several factors contribute to this situation.

Single v. Split Tax Rate

Recently there was a NextDoor Shutesbury thread about taxes in our town. A few people (including our Administrative Assessor) noted Shutesbury has a single tax rate since there is little industry or commercial business in town. In communities with split tax rates, commercial, industrial, and personal property (CIP) segments are taxed at a higher—sometimes much higher—rate than residential property. In Shutesbury, one flat rate covers everything.

This is not an unusual situation in Massachusetts. In 2019, 241 of 351 communities had a single tax rate, meaning they did not shift any portion of the tax burden from residential properties onto any other class. 

Cities are much more apt to adopt a split tax rate. Boston’s CIP segment makes up 58.30% of the city’s total tax levy, leaving the residential and open space (RO) classifications to fund the other 41.70% (for Shutesbury,  the RO classifications fund 94.33%). 

Notably, only 17 communities currently tax open space; Shutesbury is not among them.

Residential Exemptions

Twenty-two communities in the eastern part of Massachusetts offer some type of residential exemption as long as the home is the taxpayer’s principal residence. The exemption cannot be greater than 35% of the average assessed value of all residential properties. Once the city or town’s governing body decides on a percentage, it is applied to the assessed value total. This amount is then subtracted from each Class One (residential) property.  

The residential exemption gives some relief to the average homeowner while increasing taxes on rental and vacation properties and high-end houses.

State Aid

State funding estimates for the upcoming fiscal year are communicated to municipalities via the Cherry Sheet. The primary types of funding are:

• Chapter 70 (Schools);

• General Government Aid;

• School Choice (Receiving);

• State-owned Land;

• Veterans Benefits.

State Aid amounts differ greatly from one community to another, from nearly 66% of Lawrence’s annual budget (its public school system went into state receivership in 2011) to a mere .07% of Chilmark’s budget. As you might expect, the property tax levy makes up a much greater percentage of Chilmark’s town budget (nearly 83%) than does Lawrence’s (approximately 22%). 

State aid made up 12.6% of Shutesbury’s budget in fiscal year 2021.

Assessed Values

Communities set their tax rate each fiscal year based upon the proposed budget after it is approved by Town Meeting. The tax levy is the amount to be raised through the property tax (subject to limitations inherent in Proposition 2 ½--more on that in future posts), usually expressed as a dollar amount per thousand dollars of value. To arrive at the tax rate, assessors divide the amount of the tax levy by the total amount of assessed property values in town.

This means that a low tax rate doesn’t necessarily translate into a low tax bill. Simple math tells us that in towns with high property values, the tax rate will be lower than in towns with low property values—to raise the same amount of money. 

Some of the highest single-family tax bills in Massachusetts stress families’ budgets more than others. In Weston, for example, that pricey real estate tax bill of $ 21,648 represents just 5.60% of residents’ income, while taxpayers in Wenham need to set aside 20% of their income to pay their yearly tax bill of $13,713.

Similarly, Hancock’s minuscule tax bill of $764 takes a 5.77% bite out of residents’ incomes.  Monroe’s annual tax bill is a little more than double that of Hancock’s at $1,567, but households use 15.81% of their incomes—nearly three times that of Hancock families—to pay that bill.

Looking specifically at Hancock and Monroe, other differences emerge. Hancock has 314 single-family parcels compared with Monroe’s 63, where the average single-family home is valued at less than half that of Hancock’s. Interestingly, Monroe has a split tax rate, saving the town’s homeowners from paying an even bigger share of the tax burden.

Ultimately, what residents pay in property taxes depends upon the municipality’s annual budget—meaning that fiscal restraint will lower both tax rates and tax bills.