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.