Cash Reserves: Shutesbury Crushes Leverett

   

When it comes to municipal savings and reserves, there are two major players: Free Cash and Stabilization. The Massachusetts Division of Local Services (DLS) advises municipalities to create policies relating to such reserve funds to keep a cash cushion on hand in case of an emergency or financial crisis. Healthy reserve fund balances can make borrowing cheaper and easier for municipalities, as well.

Free Cash

Free Cash is money left over at the end of the fiscal year. The state must certify these funds before the town or city can use them as a revenue source for the next fiscal year’s budget. Certification takes place after June 30 and may not be completed until several months later, though the amount is considered “certified” as of July 1 of the current fiscal year. The Division of Local Services’ Technical Assistance Bureau suggests municipalities generate Free Cash at a rate of 3% to 5% of its yearly operating budget.

Free Cash is used exclusively for one-time expenses and to bolster stabilization accounts. The state frowns on using Free Cash to fund operating budgets.

Stabilization

Cities and towns can create several stabilization accounts, each with a particular purpose. Leverett has at least one Stabilization account; Shutesbury has both Stabilization and Capital Stabilization accounts. The DLS encourages the practice of generating multiple stabilization accounts, since it “stabilizes” a community’s finances, making an unexpected or emergency expense less apt to cause a fiscal crisis.

Free Cash: Leverett vs. Shutesbury

Since 2015, both Leverett and Shutesbury have maintained certified Free Cash levels of more than the suggested 3% to 5% of the town’s total annual budget. Where Leverett has had more of a struggle doing so, Shutesbury’s Free Cash is bursting at the seams.

From 2015 to 2021, Leverett’s Free Cash fund varied from a low of 4.90% in 2016 to a high of 9.18% in 2017. 

During the same time period, Shutesbury’s percentage of certified Free Cash ranged from a low of 15.28% to an astonishing high of 21.53% of the town’s operating budget. For 2021, free cash was only slightly lower, at 19.73%.

What do Leverett’s and Shutesbury’s Free Cash levels look like in dollars? For last year, Leverett had $391,909 in its coffers, while Shutesbury’s fund totaled an impressive $1,378,767.

Why is there such a yawning chasm between the two towns’ Free Cash funds? It wasn’t a disparity between annual budget totals; both towns had budgets of approximately $6.9 million that year. And, despite the jaw-dropping difference in the two funds, Leverett was, at 5.60% of its budget, comfortably above the percentages suggested by the DLS.

It seems that Shutesbury just likes to save more than Leverett does. A lot more. Some might call it cash hoarding.

Shutesbury’s 19.73% represents a level of saving that seems exaggerated, particularly when you realize that taxpayers foot the bill for this account-padding. Fiscal year 2021 was also a pandemic year, which meant hardship for some residents. The Finance Committee acknowledged this by using $220,000 of Shutesbury’s Free Cash to lower the tax rate by $1.00.

For the current fiscal year, the tax rate rose to $23.37 from the previous year’s $22.61 even as the town declined to use Free Cash to pay for the Locks Pond Road culvert repair, electing to borrow the money instead.

Stabilization

When it comes to Stabilization, Leverett steadily increased its funding levels between 2016 and 2020, while Shutesbury maintained fairly high levels (between 14.29% and 15.63% of the annual budget) for the first three years before dropping off in 2019. Shutesbury’s appropriation was a mere 8.07% that year, and 10.17% in 2020. By contrast, Leverett’s 2020 appropriation was a robust 12.52%.

Overall, Shutesbury’s cash cushion is considerably larger than Leverett’s. Saving money for a rainy day is good fiscal policy, but too much of a good thing is expensive for taxpayers. Leverett is filling its coffers more slowly and maintains a much lower tax rate than Shutesbury--$20.39 compared to Shutesbury’s $23.37. 

It appears we are paying dearly to have those reserves bulked up year after year. What motivates Shutesbury to sock away money to such an extravagant extent? There seems to be a story here, which I’ll examine next time.

Shutesbury vs. Leverett: Round Two

At first glance, the current budgets of Shutesbury and Leverett look very similar. There are many of the same primary categories:  Public Safety/Protection of Persons & Property, Education, Public Works/DPW, and Culture and Recreation. The total budget amount is also similar:  $6.63 million for Shutesbury and $6.54 million for Leverett. For both towns, the budget request amounts for the categories just described are similar.

There are other expense categories where the two towns diverge. Debt, General Government, and Miscellaneous are three areas where there are stark differences. Another area of interest is the amount in each town’s cash reserves.

Let’s take a look at each section side by side and compare.

General Government

General Government is the first category listed on each town’s budget and encompasses the salaries and expenses associated with Town Hall employees, boards and committees. For Shutesbury, the requested amount for fiscal year 2022 was $563,704; for Leverett, $357,419. 

That’s a whopping 37% higher cost for Shutesbury’s General Government than Leverett’s. Where is that $206K hidden?

Here are some of the expense categories/departments where there are large differences in the budgets of Shutesbury compared to Leverett:

• Selectboard: $37,745 v. $28,679;

• Town Administrator: $68,763 v. $88,849;

• Finance Committee reserves: $75,000 v. $40,000;

• Assessors: $58,959 v. $49,425;

• Treasurer: $52,446 v. $32,492;

• Collector: $47,968 v. $28,976;

• Town Counsel: $15,000 v. $6,000;

• Land Use Clerk (Shutesbury only): $15,126;

• Town Buildings: $57,152 v. $72,176 (added together from several departments);

• Other General Government (Shutesbury only): $19,742

These items account for about half of the $206,000 difference between the two budgets. It should be noted that in the case of the Finance Committee reserve fund, any leftover money is moved to Free Cash at the end of the fiscal year. 

There are many other categories in which Shutesbury budgets more than Leverett; I chose to highlight the ones with larger amounts in an effort to identify why there is such a disparity between the towns’ budgets.

It appears that Shutesbury is more generous with salaries, stipends, and expenses than is Leverett. This is not necessarily a bad thing--but it does cost money, and lots of it.

Miscellaneous 

Shutesbury’s funding in the Miscellaneous category far exceeds that of Leverett: $1,077,620 compared with Leverett’s $466,764. 

A cursory look identifies two hefty expenses for our town: Health Insurance, at $520,000, and County Retirement, at $237,000. Comparable expenses for Leverett show $136,000 for the former and $112,918 for the latter.

These two categories alone cost Shutesbury taxpayers over $500,000 more every year than they cost the taxpayers in Leverett.

There are other large expenses. Shutesbury’s Medicare tax, listed as $42,064, is much larger than Leverett’s $9,904, while its OPEB (Other Post-Employment Benefits) fund contribution is a huge $50,000 while Leverett’s is a mere $10,000. Town insurance will cost Shutesbury taxpayers $68,000 this fiscal year, compared with $41,000 for Leverett’s citizenry. And there is also the annual taxpayer contribution to Shutesbury’s Library Building fund, in the amount of $25,000.

Can Shutesbury reduce any of these expenses? For instance, could we get a better deal on employee health insurance? With this type of expense rising every year, this issue deserves consideration.

Correction: A reader noted that health and other insurance costs are listed in both Miscellaneous and the Education categories in the Leverett budget. When totaled, insurance costs level out between the two towns. Education costs in Shutesbury, however, become much higher--but that's a subject for another day.

Debt

Leverett shoulders a heavy debt load compared to Shutesbury:  $380,259 for fiscal year 2022. The interest portion of that debt amounts to $72,759. By contrast, Shutesbury currently owes $20,435 in Water Pollution Abatement Trust loans to aid homeowners with failed septic systems, as well as $2,000 in short-term notes.

In 2012, Leverett voted to take out $3.6 million in long-term bond debt in order to pay for its broadband network, which likely accounts for its higher debt load. 

Though less debt is generally a good thing, Leverett’s debt load is far lower than the state’s limit of 5% of equalized values, i.e., the total value of all property in a city or town. Currently, Leverett’s percentage sits at .13%.

Next time, we’ll take a look at each town’s Reserve Funds: how they differ, how they arrived at their current levels, and how those levels affect taxpayers and town finances. 

One Big Way Shutesbury and Leverett Differ

Shutesbury and Leverett are similar in their rural nature, unique home styles, and comparable populations. Along with Amherst and Pelham, Shutesbury and Leverett make up the Amherst-Pelham Regional School District. 

A closer comparison of the two towns finds some key differences, as well--most of them financial. Of the two, Leverett is the wealthier, has far more debt and fewer cash reserves than Shutesbury, and appears to spend much less than Shutesbury on General Government and Unclassified/Miscellaneous budget items despite the two towns having comparable fiscal year budget totals ($6,565,414 for Leverett and $6,601,022 for Shutesbury in FY2020). Education expenses of $3,980,966 for Leverett and $3,984,136 for Shutesbury were intentionally left off the chart to improve readability.

The Property Wealth Gap

Sorting for Shutesbury and Leverett on the Division of Local Services’ data page, the differences between the two towns are easy to see. Looking at just the last 10 fiscal years shows Shutesbury lagging Leverett in every financial category. 

For example, Leverett’s cumulative single family value has increased quite steadily since 2012, from nearly $195,000,000 to over $211,000,000 in 2021. While that may seem like a small increase over a decade, it represents a huge gain over Shutesbury, where aggregate value actually declined. Today’s value sits at a little over $187,000,000, a precipitous drop from 2012’s $194,000,000.

In 2017, Shutesbury’s value took a dive to just under $180,000,000 from the previous year’s total of $191,000,000--and only partially recovered thereafter, putting us even further behind Leverett.

Naturally, the value of the average single family home in Shutesbury has been historically less than that of Leverett. Between 2012 and 2019, the difference in value was sizable--in the $50,000 to $60,000 range. In 2020 and 2021, Leverett’s values shot up by $11,000 and $18,000, respectively, over 2019 values. The value of the average Shutesbury home stayed nearly the same, widening the wealth gap with Leverett even more.

The Income Gap

Per capita incomes in Shutesbury have always been lower than incomes in Leverett. Both towns have seen a general rise over the past 10 years in annual income, but Shutesbury is in no danger of catching up to Leverett. 

For Leverett and Shutesbury, 2012 per capita incomes were $34,333 and $20,662, respectively. By 2021, Leverett’s per capita income was $47,510 per year, while Shutesbury’s was only $26,831. This $20,000-plus difference doesn’t reduce our tax burden relative to our neighbor, however.

The average single family tax bill for both towns has been gradually increasing over the past decade except for 2021, when Leverett’s dropped by less than $100 and Shutesbury’s by approximately $300. Our average bill of $5,662 for fiscal year 2021 was only about $800 less than Leverett’s $6,368; in 2020, the difference was around $500.

Lower incomes and high tax bills mean the folks in Shutesbury have to fork over more of their yearly salaries to pay their taxes than do the taxpayers in Leverett. Averaged over the 10-year period of 2012 to 2021, we in Shutesbury paid 23.04% of our annual incomes in property taxes while Leverett property owners paid only 16.71%. The difference was especially stark in fiscal year 2021 when we paid 21.10% of income in local taxes while our neighbors paid a minuscule (by comparison) 13.40%.

You won’t be surprised to learn that as a percentage of value, Shutesbury property owners pay higher rates than people in Leverett. In fiscal year 2012, we paid 1.96% of our property value in taxes while Leverett paid 1.78%. In 2021, we paid 2.26% of value in taxes--which would have been higher if the town hadn’t moved $220,000 in Free Cash to lower the tax rate. In Leverett, that factor was 1.97%.

Over the past decade, Leverett’s tax rate has been lower than Shutesbury’s, as well--even when they were building out their broadband infrastructure. For fiscal year 2022, their tax rate is $20.40, while ours is $23.37.

Can’t get enough of the contrasts between our town and Leverett? Tune in next time when I compare debt, savings, personnel costs, and other budgetary goodies.  

Small Town, Big Government

 

For small towns like Shutesbury, the lion’s share of revenues is allocated to education, and the local government is often run by part-time employees and volunteers. If the population (and tax base) grows, it stands to reason that town government will also expand. If the number of residents stays the same or decreases, you can reasonably expect the cost of local government to follow in step.

According to the Donohue Institute at UMASS Amherst, Shutesbury’s population decreased by 1.18% between 2010 and 2019, while general government costs have increased from approximately $294,000 in 2010 to $484,000 in 2019. 

That’s a big increase, so I decided to look at other Franklin County towns with similar populations. I teased out Ashfield, Leverett, and Shelburne to see how their populations and government expenses have changed over the same timeframe.

Population numbers are from 2018 and costs and expenses are rounded up or down to the nearest thousand. DLS Gateway links load to default pages, so sort by town and/or topic to check references for each town and subject discussed.

Ashfield: Population 1,734

The cost of local government for Ashfield climbed from $246,000 in 2012  to $434,000 in 2019 (information was unavailable for 2010 and 2011). General Fund expenditures for General Government equaled 9.76% of the town’s budget in 2019, with 57.33% going to education and 15.33% allocated to Public Works.

Ashfield’s population decreased by 1.10% between 2010 and 2019.

Leverett: Population 1,861

Our neighbor, Leverett, saw its government costs increase from $290,000 in 2010 to $386,000 in 2019. Between 2014 and 2017, yearly costs jumped around from about $418,000 to $500,000 before settling in at $355,000 in 2018. Those increased costs were likely due to the building of the town’s broadband network. For 2019, General Government made up 6.07% of Leverett’s annual budget while education took the biggest chunk at 62.21%.

Leverett’s population decrease from 2010 to 2019 was quite small--a mere 0.37%.

Shelburne: Population 1,861

In 2010, Shelburne’s General Government costs were $273,000. Costs have increased each year (excluding missing data for 2012 and a jump to $427,000 in 2015) to the 2019 total of $415,000. Education used 52.60% of Shelburne’s 2019 budget and General Government’s share was 9.00%.

Shelburne lost 3.36% of its population between 2010 and 2019, a big loss compared with the other towns profiled in this post.

Shutesbury: Population 1,774

Breaking down Shutesbury’s $484,000 in General Fund expenditures in 2019 shows our Education expenses slightly lower than Leverett’s (59.66%) and General Government coming in at 7.38%.

What stands out here is that Shutesbury’s increase in funding for General Fund expenditures has been steadily increasing each year since 2010. The other towns increase or decrease funding from one year to another, likely in response to local projects and priorities.

Shutesbury’s fiscal year expense budget shows close to $564,000 in General Fund expenditures set aside for FY 2022.

Upon closer inspection of the “Unclassified” category on the DLS Gateway, I see that Shutesbury’s numbers are far higher than the other three towns under consideration.

What are “Unclassified” expenses? According to the Community Comparison Spending by Function page:

Unclassified = Fixed costs + Intergovernmental + Other expenses

ClearGov describes this expense segment as “unknown or a mixture of more than one expense type”.

Since 2010 (excluding the aforementioned missing data), all four towns have seen their Unclassified totals move in an upward trajectory. Shutesbury differs in that its 2010 dollar amount was quite high--$610,000--compared to Leverett’s total of $290,000; Shelburne’s   $242,000 total was lower still. Ashfield’s data for 2010 and 2011 is missing, but its 2012 total was a mere $210,000.

By the process of elimination, I found that “Unclassified” expenditures on the DLS website are almost identical to those categorized as “Miscellaneous” on Shutesbury’s expense budget.

Next time, I’ll take a look at how Shutesbury’s high expense categories compare with those of our wealthier neighbor, Leverett.

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.