FROM THE TOWN ADMINISTRATOR’S DESK
By Gregory T Federspiel
Budget discussions typically focus mostly on expenditures – What will it cost to deliver certain services? Are there alternative ways to deliver the services residents want in a less costly manner? Of course it takes revenues to pay for these services and the Town must approve a balanced budget every year. The Town relies on a number of revenue sources and must adhere to state requirements in managing these sources.
By far the largest source of revenue for the town is the property tax which accounts for 80% of our revenue. And nearly all of our property in town is residential – less than 5% of all property values are commercial. The amount of property tax a home owner pays depends on the value of the home (state law requires us to set values within 10% of current market value), times the tax rate, which is currently set at $11.03 per thousand of value. The rate is determined by how much money needs to be raised, based on approved budgets, given the total value of all property. For the current fiscal year, voters approved expenditures that required raising $26.4 million on a total valuation of all properties of $2.4 billion. Doing the math yields a tax rate of $11.03 per thousand.
Another $7 million in revenue is derived from various other sources. The Water and Sewer enterprise funds generate some $2.4 million through user fees. Local receipts, including car excise taxes, ambulance collections from insurance companies, fees from permits, and Park and Recreation revenue (Singing Beach!) brings in approximately $2 million. Use of our fund balance (reserves) for capital and Community Preservation funds earmarked for specific projects rounds out most of the rest of our town revenue. A small amount of state aid is also part of this mix.
A perennial debate revolves around whether various fees and charges should be raised. Some charges, like the excise tax, is set by the state, not locally. Fees for permits and licenses tend to track neighboring communities. We have recently increased these along with higher parking ticket fees and harbor mooring fees. Some argue that the fees should be higher, others say taxes are high as it is, don’t charge me more through fees! While there may be opportunities for increasing non-tax revenue such increases are not likely to have major impacts on taxes.
State law known as Proposition 2 ½ stipulates that total taxes collected year to year can increase by 2 ½ percent plus “new growth” through regular voter budget approvals unless voters specifically approve, both at Town Meeting and the ballot, exclusions (new debt or capital payments that are increases above the limits of Proposition 2 ½ for the duration of the borrowing) or overrides which are permanent tax increases voted in to pay for desired services. While seldom utilized, the law also allows for underrides where voters can set a permanently lower limit to taxation.
New growth is new construction, mainly new homes, and additions to existing homes. Manchester averages about 10 new homes a year and additions that, all told, increase tax revenue by another 1% or so. Thus, to pay for town operating expenses that typically increase by 2 - 2.5% and school district expenses that for Manchester have been increasing recently by 3.7% annually, exclusive of exclusions or overrides, we have relied on tax rate increases of 2.5% plus new growth of roughly another 1%. (In a future article more information on past overrides and exclusions will be presented.)
Revenues are an equally important part of the budget equation and managing our revenues needs to go hand in hand with managing our expenditures. The budget debate that will take place at the Annual Town Meeting should keep both parts of the equation in mind.