4 Tips Local Government Can Take from Personal Finance

Courtesy of Clipart Library

 Why can’t the government be run more like a household?

Perhaps you have heard of the Government-Household analogy which purports that government could run more efficiently if it was forced to abide by the rules of household finance:  spend within your means, limit debt, and “tighten your belt” during times of economic hardship.

Usually, this argument is made regarding the federal government, where comparisons between federal debt and household debt are spurious, and living within your means is irrelevant when you are able to print money and increase taxes at will. The reality is that this idea is bandied about to make political hay and not as an attempt to make “big government” less wasteful.

Local government is another matter. Small towns with Annual Town Meetings answer to the voters, who, in theory, have a direct say in financial matters. Town finances, being simpler than state and federal finances, are more easily understood by taxpayers who see their tax bills increase with every new expense. Although small towns sometimes take on debt, the terms are less favorable for them than for the federal government and they must get approval directly from the voters before borrowing.

These differences make local government more amenable to the precepts of personal finance. I used articles from the following personal finance websites to inform this post, condensing and combining concepts that are applicable to both personal and public finances.

7 Money Management Tips to Improve Your Finances

Money Management: 4 Tips for Mastering Your Finances

The 5 Principles of Personal Finance Everyone Must Follow

Personal Finance

The Difference Between Wants and Needs

Without further ado, here are four principles that can be applied to both municipal and personal finances:

Create a Budget and Spend Less than your Income/Revenue

Knowing how much money you have coming in over a certain span of time and spending below that threshold is a primary tenet of personal finance. This practice allows you to save money and keeps you out of debt. A budget is a popular tool to achieve this goal.

The primary source of revenue for small towns is the property tax, which is set in response to the size of the town’s proposed budget. In practice, this usually means that an increased budget is not a problem for a small town since the tax levy (and tax rate) simply increases to cover higher expenses. 

This doesn’t mean that rising taxes are inevitable. Towns can opt for level-funded budgets to keep a lid on tax rates. If there are unavoidable increases in either household or municipal budgets, cuts are made elsewhere to keep the budget in balance.

Save with Explicit Goals in Mind

Personal finance sites exhort readers to create funds for several important financial goals: an emergency fund for use during economic downturns, an account to fund big purchases, and a retirement fund. While the last objective applies to households only, the other two can apply to municipalities as well.

Emergency Fund

For households, this generally entails putting aside enough money to cover expenses for three to six months in the case of job loss. This money could also be used to pay for things such as unexpected medical bills.

Municipalities have their own mechanisms for setting aside money. Town cash reserves are usually in the form of Free Cash, which is leftover money from the previous year’s budget, and Stabilization, described by the state’s Division of Local Services as a municipality’s “rainy day fund”. After Free Cash levels are certified by the state, some of that money can be moved into Stabilization with a vote at Town Meeting. Free Cash and the total of all Stabilization accounts (communities can set up several if they so choose) make up the town’s cash reserves. Some towns return a portion of free cash to the taxpayer in the form of a reduced tax levy.

Saving to Fund Large Expenditures

Creating an account to save money for future purchases makes sense for households and local governments alike. 

Putting away money each week for planned expenditures like the eventual replacement of household appliances, maintenance and repair of the family car, and other planned expenses can spare a family’s emergency fund and make budgeting more consistent. 

Towns have similar concerns, such as the costs of maintenance and repair of their buildings and vehicles, as well as soaring employee healthcare costs. Planning ahead for large expenditures such as roof replacement projects on town-owned properties can help keep town budgets from escalating every year, burdening taxpayers.

Is there such a thing as too much saving? For households, probably not–unless hoarding cash is turning you into a miser. For local governments, socking away tax money with no spending plan in place increases tax bills for residents with no benefit. 

I’ve written previously about Shutesbury’s tendency to save vast sums of money each year–much more than neighboring towns–while using very little of this cash hoard to fund necessary expenses such as replacing the roof on the elementary school and funding the Locks Pond Road culvert project without borrowing.

Prioritize Needs over “Wants” 

Balancing a household budget often requires deciding which expenses are necessary and which are not. If food costs increase, for example, it makes more sense to cancel cable service than to buy less food. The cost of some necessary items can often be trimmed, as well–such as purchasing a less pricey phone and contract to cut expenses.

Local governments should follow this rule as well. Does it make sense to buy new town vehicles now, simply because they were requested by retiring department heads, or wait until the new employee can have a say in the matter? Is it responsible to move a large amount of money that could be used to fund the school roof replacement and apply it instead to the construction of an $8,300,000 library? These issues were discussed on April 14 at a joint meeting of the Finance Committee, Personnel Board, and the Capital Planning Committee (Zoom link is available from the Shutesbury Town Clerk). I attended that meeting and I found the logic behind these decisions to be very puzzling.

Avoid Debt Whenever Possible

Mortgage debt aside, personal finance gurus warn against incurring too much debt. By creating a budget, learning to save, and prioritizing budgetary needs, households are better able to avoid taking on debt.

Municipalities can acquire debt more easily and inexpensively than households, but that doesn’t mean they should. Borrowing costs add to residents’ tax burden when cash reserves are available to use. If the town wants to replace the reserve money by raising and appropriating money for that purpose, it will be less burdensome for taxpayers since no borrowing costs will be included and the town can levy the amount over a period of time that fits the needs of the town, not those of the bank.

The pandemic, supply chain shortages, record inflation, and a new war in Eastern Europe have all contributed to escalating costs and an uncertain future. Meanwhile, the Shutesbury school roof continues to need replacement. Households are feeling the pinch, prioritizing spending, and tightening their belts. Shouldn’t our local government do the same?

Affordability: How Shutesbury Ranks Compared to All MA Communities

Last year, I compared Shutesbury’s tax rate, average single-family tax bill, and cash reserves with those of other Franklin County towns with similar populations. I found that our tax rate was lower than Wendell’s though our average tax bill was higher. I also discovered that Leverett was much wealthier than Shutesbury, with Leverett taxpayers dedicating a mere 13.4% of household income to the payment of property tax bills compared to Shutesbury’s 21.1%.

How does Shutesbury’s affordability compare to the rest of the state? To find out, I compared our town’s fiscal year 2021 and 2022 tax rates, average tax bills, tax burden, and level of Free Cash to all 351 Massachusetts municipalities to see how we stack up. Here are the results.

Tax Rate

Shutesbury’s tax rate of $21.83 is the fourth-highest in Massachusetts–only the Western Massachusetts municipalities of Greenfield ($22.32), Wendell ($23.24), and Longmeadow ($24.64) have steeper rates. Last year, we were in sixth place, with Adams and Wilbraham joining the small group of communities with a higher tax rate than Shutesbury.

Note that this tax rate comparison reflects only the municipalities’ residential tax rate (and, in some cases, open space) and doesn’t include other classes such as commercial, industrial, and personal property. For communities with a split tax rate, some of the tax levy is shifted from residential to commercial properties, which usually pay a higher rate. Like many small towns in the state, Shutesbury has a single tax rate.

Average Tax Bill

Shutesbury’s average single-family tax bill edged up to $5,876 in FY2022 from the prior year’s $5,662. Our ranking changed as well: Shutesbury placed at No. 167 out of 351 communities for the highest average tax bill in FY 2022, a drop from its 2021 rank of 153.

How did that happen? Pandemic-induced real estate sales boosted values across Massachusetts, pushing the median home sale price statewide to an all-time high of $510,000. Cities and towns adjusted their total single-family values to reflect this change, which lowered tax rates. For Shutesbury, the value of all single-family properties rose from $187,324,770 in FY2021 to $201,594,118 in 2022, which produced a tax rate of $21.83 compared to the previous year’s $22.61.

This is a perfect example of how a lower tax rate does not necessarily reflect a reduced tax burden, as evidenced by the uptick in the average single-family tax bill. The average single-family value rose to $269,151 in FY2022 from $250,434, a value that produced a higher average tax bill despite a drop in the tax rate:

269,151 ✕ 21.83 /1,000 = $5,875.56

Some bills will be higher and some will be lower; on average, however, the tax burden increases.

Single-Family Tax Bill as a Percent of Value

Shutesbury ranks fourth in the state when it comes to the percentage of a property’s value our tax bills represent. For FY2022, the average tax bill of $5,876 represents 2.18% of the average single-family value of $269,151. Compare this to Leverett, where households pay, on average, 1.88% of value in taxes ($6,515 average bill on $345,831 average value). 

In 2021, Shutesbury ranked sixth (2.26%) for this metric, with Adams and Wilbraham again showing a higher or equal (in the case of Adams) percentage of property value reflected in residents’ tax bills.

Wealth Indicators

An important metric to consider is the wealth of a community’s residents and how much of the average household’s income is needed to satisfy the annual tax burden.

With 20.49% of the average household’s income dedicated to paying property taxes, Shutesbury’s FY2022 ranking stands at No.19–meaning that only 18 other communities in Massachusetts pay a higher percentage. That’s a small improvement over our 2021 ranking of 16 and 21.10%. 

Per capita income for Shutesbury was reported as $26,831 last year, compared to $28,682 for this fiscal year, a decrease from last year.

Comparing per capita income with the Massachusetts average, Shutesbury falls short. According to the U.S. Census, Massachusetts's per capita income is $45,555 (in 2020 dollars).  

Shutesbury households do better when it comes to median annual income, which the U.S. Census reports as $85,000–slightly higher than the state-wide value of $84,385.   

Free Cash

Shutesbury’s Free Cash levels have dropped over the past fiscal year, from 19.73% of the operating budget in 2021 to 14.58% in 2022. The fund itself has decreased only slightly, however, from $1.4 million in FY2021 to $1.2 million in FY2022. 

This stash places Shutesbury well beyond the Division of Local Services’ suggested reserve level of 3% to 5% of a municipality’s operating budget. For FY2021, Shutesbury ranked No. 17 (click link, export to Excel, sort), for the highest percentage of Free Cash as a percent of its annual budget. This year, we ranked No. 36–though 29 communities have not yet had their Free Cash reserves certified by the state.

Tying it All Together

Compared to all municipalities, Shutesbury gets low marks for affordability based on its exceptionally high tax rate and single-family tax bills. Our town also requires taxpayers to fork over a larger percentage of their income than most other communities to satisfy their local tax obligations. Lastly, our high tax rate results in residents paying a higher percentage of their property’s value, resulting in a heftier tax bill.

Why is Shutesbury such an expensive place to live? As this Shutesbury.org document shows, the annual budget has slowly crept upwards over the past two decades, as has the tax rate. Property values have not kept pace, however, which means comparably less value is funding higher budgets. Beginning around 2010, values began to languish while annual budgets did not. It was around that time that the tax rate began to rise in earnest as stagnant property values struggled to prop up budgets that continued to climb.

The town has developed some financial policies that have seriously exacerbated this problem. One, which I have written about before, concerns the tendency to stockpile cash with no clear goal in sight. Over the years, Shutesbury has postponed work on the town’s infrastructure despite having more than adequate reserves. This practice increases taxpayer costs due to inflation and a worsening of the issues affecting the neglected structures.

Instead of using reserves as necessary and creating a plan to replenish those reserves over time, relatively small amounts of the town’s savings are applied to various capital outlays, with the balance being borrowed, incurring unnecessary interest costs. In addition, there are line items built into the budget specifically to pad reserve accounts, resulting in overcharging taxpayers without benefit to them. These items include previously paid-off debts and funds set aside for a specific building project, which may or may not occur. 

Shutesbury officials often lament that we need additional revenue to lower residents’ tax burden and make the town more affordable. That scenario seems absurd since the town has no business presence to lighten the tax load. A more reasonable approach would be to limit Shutesbury’s spending within the parameters of a town with slow-growing property values and a dwindling population.

Weekly Factoids:

 

How Did You Fare During 2021?

 

Profits Soar as U.S. Corporations Have Best Year Since 1950

Source: Bloomberg Quint

 

Corporate Tax Rates on Taxable Income, Then and Now

 

1950:  First $25,000 = 23%

Over $25,000 = 42%

 

2021: All Taxable Income: 21%

Source: The Tax Foundation

More Tales of Woe and Dysfunction with Shutesbury’s Boards and Committees

 

Courtesy of Clipart Library

Last week’s post about the interference and harassment of Shutesbury’s Conservation Commission describes a situation that is becoming more common in our small town. As I read minutes and other public documents and, in some cases, viewed meeting recordings, I found problems with the appointment process to Shutesbury’s boards and committees. 

One issue is that appointments have become a subjective process, with the personal feelings of the appointing officials being the primary driver of committee appointments.

Other problems include possible conflicts of interest and a strong tendency to appoint multiple representatives of entities like the Select Board and/or Finance Committee to influence the decisions made by various boards and committees.

To start, I will harken back to the Select Board meeting of November 23, 2021, to highlight the preferential treatment given to one committee requesting that their board be expanded by the appointment of a new member compared to how a request by another committee to appoint someone to fill a vacancy was handled.

Recreation Committee v. Town Buildings Committee

In a series of posts regarding the infrastructure problems at Shutesbury Elementary School, I described the ill-treatment of the Town Buildings Committee by the Select Board who refused to appoint a new volunteer to the Committee to fill a vacancy. The last post in that series mentioned that the Recreation Committee had also requested a new appointment–which was granted quickly and easily.

The lack of protocol for appointing board and committee members in town is spotlighted by the contrasting treatment of these two boards and how their concerns were handled.

Agenda

While the Buildings Committee discussion was listed on the agenda for November 23, the Recreation Committee request was not; it was discussed under an additional “Town Administrator Update” section inserted before the scheduled Buildings Committee agenda item.

Mode of Request 

The Recreation Committee request for a new appointment was emailed to the Town Administrator by a Committee member (not the Chair); no formal vote of the Recreation Committee regarding the appointment was taken. While not reflected in the minutes, the meeting recording reveals that the requesting member is married to one of the Select Board members. No Recreation Committee members were present at the Select Board meeting.

Despite having a quorum at the November 23 meeting and the Building Committee Chair stating that its members had agreed to bring the appointment request forward to the Select Board, the request was refused because the Select Board Chair claimed there was no formal vote taken.

Reason for Appointment Request

The reason for the Recreation Committee’s request (described in the email message) was that they were very “busy” and had a willing volunteer on hand. Though appointing a new member required the Select Board to expand the number of Committee members from five to six, this was done with minimal discussion.

The Buildings Committee, having been admonished by the Select Board for its infrequent meetings, noted that achieving a meeting quorum had been difficult. The Committee’s request was meant to help overcome that problem; it was still refused.

Qualifications of New Appointee

Since no Recreation Committee members, incumbent or prospective, were present at the Select Board meeting, no questions were asked about the qualifications of the Recreation Committee’s prospect and no interview was conducted before the appointment was confirmed.

Even though the Building Committee’s prospect was present to answer questions, this person was deemed by the Select Board to be unqualified for a volunteer position on the Building Committee.

Interestingly, a Select Board member noted during the brief discussion of the Recreation Committee’s request, “I think if we have a committee asking for help and we have someone willing to help, I think we should appoint them.” Why would this not apply to the Building Committee?

Boards and Committees with Possible Conflicts of Interest

Personnel Board

As I looked at the makeup of various boards and committees in town, I noticed an oddity with the five-member Personnel Board.

First, the Personnel Board page on Shutesbury’s website lists The Town Administrator, a full-time town employee, as the main contact. Additionally, there is no Chair listed–the individual often designated as the main contact person. 

I read through several published Personnel Board minutes and could not discern whether there was someone serving as either Chair or Secretary. The meetings simply come to order, adjourn, and minutes are taken, without any attribution. Activities are spoken of passively, without names being ascribed to actions or comments. When names are mentioned, the one most often recorded is that of the Town Administrator.

I checked the Personnel Board’s bylaw and found that a Chairperson and Secretary are to be elected annually. Since the Board is charged with “oversee(ing) the administration of personnel policies” and “investigate(ing) the duties and rates of salaries and wages for any and all positions”, it is completely inappropriate for the Town Administrator to exert such a heavy influence on the Board. This is particularly true since the Board has been conducting job studies and recommending pay increases for many town employees.

Secondly, there are two current Finance Committee members on the Personnel Board–one being the Finance Committee’s chosen representative. The other fills one of the three Community-at-Large positions. This is a weighty Finance Committee presence on a Board that is meant to have more representatives from the general community. The three “Community-at-Large” members of the Personnel Board are appointed by the Town Moderator.

Police Study Group

According to Shutesbury.org, “The Police Study Group is an advisory subcommittee created by the Shutesbury Select Board to examine the needs, resources, and options for the Town of Shutesbury as it pertains to policing.”

For the past several months, this group of nine individuals, including two of the three Select Board members and the Acting Police Chief, has been meeting and discussing the future of Shutesbury’s Police Department. 

Some townsfolk have problems with the makeup of the group, since the Acting Police Chief has a financial interest in the recommendations of the subcommittee and is a voting member of the group. Another concern is the presence of two Select Board members–which not only constitutes a quorum but may also exert considerable influence on the eventual findings of the group.

Two Shutesbury residents have filed Ethics Complaints with the State Ethics Commission regarding a possible conflict of interest in the Acting Police Chief’s role with the Police Study Group. In addition, one of these residents has also contacted the Massachusetts Attorney General’s office with Open Meeting Law concerns regarding the presence of a Select Board quorum without corresponding public meeting notice and taking of minutes. 

The smooth operation of a small, local government like ours depends on the effectiveness of its boards and committees, good communication, and the contentment of its volunteer workforce. When this is not the case, we all suffer.

But all is not lost. As citizens, we have the power to change things in town. Stay informed by signing up for Town email alerts and board and committee meeting notifications. You may also sign up for NextDoor, where many town issues are discussed. 

When you see problems and have concerns, email your elected officials on the Shutesbury Select Board. They are here to serve us!

Above all, participate in Annual Town Meeting and VOTE. The Select Board is the Town’s appointing authority, and we can influence how board and committee appointments are made by changing the face of that Board. In the end, it’s always up to the voters–and that’s us, folks!

Weekly Factoid:

 

If your household’s annual adjusted gross income is $73,000 or less, the IRS Free File program can provide you access to online tax preparation services for FREE:

 

IRS Free File Online Options

Volunteering in Shutesbury is a Total Hassle

Courtesy of Clipart Library

Like many small towns, Shutesbury depends on a great many hard-working volunteers to keep our local government humming along. These people donate both their time and expertise to various town boards and committees–often, more than one. Currently, there are 32 boards, committees, and commissions listed on the Town of Shutesbury’s homepage. That’s a lot of free labor, folks.

Sometimes, boards and committees are forced to conduct business without a full complement of members. This becomes a problem when meetings are missed due to a lack of quorum, the minimum number of members necessary to hold a meeting. Knowing this, it would behoove our Selectboard and Moderator to make the path to volunteerism as smooth as possible for prospective board and committee members.

Unfortunately, this is not always the case here in Shutesbury.

Volunteering Can Be Easy

My first experience with volunteer work in Shutesbury was in the mid-1990s. Back then, residents discovered vacancies on board and committees primarily through the Our Town Newsletter and printed materials available at Annual Town Meeting. I filled out a questionnaire that asked which governmental body attracted my interest. Before I could put my paperwork in the collection box, the Administrative Assessor took me aside and asked me to consider their Board. I agreed and asked about the next steps. She told me to attend the next meeting–she’d take care of the rest. Easy, peasy.

But Not Always

Over the past year, town officials have often resisted appointing new committee members even when there is documented support from the incumbents of said committee. In some instances, such as the one presented below, town officials have launched personal attacks against prospective members in an open meeting. 

Here is one committee’s story.

Select Board Quashes Conservation Commission Appointment

On March 11, 2021, the Shutesbury Conservation Commission voted to recommend Don Wakoluk to fill the Commission’s vacancy. The members noted that Mr. Wakoluk, the town’s Tree Warden, had been consistently attending their meetings. The minutes of the March 25 meeting state that the Commission Chair sent an email to the Select Board on March 15 informing them of the vote, but that the issue was not placed on the Select Board agenda. In fact, the Commission’s request was placed on the Select Board agenda for the March 16 meeting and discussed at length. 

By April 8, the Select Board still had not acted on Mr. Wakoluk’s appointment, though the issue was on the agendas for the March 16 and March 30 meetings and was discussed at both meetings. The Conservation Commission minutes of April 22 note that the appointment was to be discussed again at the April 27 Select Board meeting. Commission members sent emails to the Select Board showing support for the appointment.

The discussions surrounding the requested appointment of Mr. Wakoluk at the March 16 and March 30 Select Board meetings revealed the consideration of unrelated and irrelevant issues. For instance, at the March 16 meeting, the opinion of the departing Commissioner (who was not present at the meeting) was brought into the conversation by the Town Administrator, who noted that person had “reservations” which were found to be based on a personal, not professional, bias. After the current Commissioners reiterated their support of the candidate, the Town Administrator continued questioning Mr. Wakoluk. The Select Board decided to postpone the vote per one Board member’s request for more time to make a decision, placing the matter on the March 30 Select Board agenda.

The March 30 meeting opened with public commentary denouncing the March 16 discussion of Mr. Wakoluk’s Commission appointment as inappropriate for an open, rather than executive, session. When asked, one Select Board member said the appointment had been postponed due to “the emotional content of the public response” following the March 16 meeting.

The vote took place on April 27. Once the vote was on the table, several people spoke in favor of the appointment, praising Mr. Wakoluk’s experience and qualifications. A former Select Board member also spoke, noting that the role of the Select Board is to appoint a candidate to a committee, particularly when there is unanimous agreement amongst committee members. Failure to do so, he opined, would unduly complicate the appointment process.

The vote to appoint failed with one “yes” vote, one “no” vote, and one recusal. The Select Board member voting against said her reasons included a possible conflict between the roles of Commissioner and Tree Warden; concerns about Mr. Wakoluk’s opposition to solar projects “in the past” and whatever “information” caused the recusal of the third Select Board member. None of these issues were expanded upon for the record.

This is only one committee’s experience dealing with abusive behavior and interference by the Select Board and Town Administrator. These actions complicate committees’ efforts to fill vacancies, achieve a quorum, and conduct business while needlessly causing volunteers undue and unnecessary stress. Next time I will share similar experiences from other boards and committees and examine the lack of procedure and subjective criteria used by town officials when appointing volunteers.

Weekly Factoids:

 

The hourly dollar value of volunteer labor in 2019: $25.43 

 

In 2021: $28.54

 

Sources: 

ICMA Blog: Volunteerism by the Numbers: The Value of a Volunteer

 

Independent Sector: Value of Volunteer Time