Southbridge’s Fiscal Cliff

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Ken O’Brien

I have to start with a slight explanation here. The town of Southbridge operates on a July 1 to June 30 Fiscal Year. The stateoperates on a January 1 to December 31 Fiscal Year. Thus, the state aidnumbers in the FY 2013 town budget are derived from the FY 2012 state budget.
That having been said, with the inclusion of theincrease of $100,000 in the FY 2013 town budget at last night’s town councilmeeting it is still $31,001 less than the FY 2012 budget.
Over that period stateaid for unrestricted general government uses declined by $215,123. However,Chapter 70 funds to the school portion of the budget, increased by$1,516,393. That’s a net increase in the major components of state aid of $1,301,270. The bigdifference is that in FY 2012 the town received $1,245,730 in MassachusettsSchool Building Authority Payments. In the FY 2013 budget, this amount is zero.Are there no more payments forthcoming in this regard? Do they account for the substantial reduction indebt service year to year? Were they related toconstruction expenses of the new school that were not capital items? Are all ofthose expenses now liquidated? Whatever the case, they should not have beenused to finance town operations, unless of course there was some interestingallocated costs chicanery.

Note: Does not include the addition of $100,000 in expenses at the town council meeting            of December 3, 2012.

In the course of last night’s meeting Mr. Cournoyerwas asked by how much the budget would have to be decreased to maintain thecurrent tax rate. He declined to answer, saying it would be irresponsible tothrow out a number.
Well, let me jump in here. The newly adopted taxlevy is $16,905,379. The tax rate is a 3.6% increase over the prior year. Thus,to preserve the current tax rate we would reduce the proposed tax levy by 3.6%.That amounts to a reduction of $608,594. Was that really that hard?
In response to that question, Town Manager Clarkraised another objection.
He pointed out that we were already halfway throughthe FY 2013 budget. To apply the total reduction to the remaining six monthswould be devastating.
Well, that may be more than a little misleading. Thefirst half of the FY 2013 budget has been financed through the tax rate set inDecember 2011. Disregarding any unpaid expenses that carry over beyond January1, 2013, the current budget would only have to be reduced by half the aboveamount – i.e. $304,297. That’s a pro-rated reduction of 1.3%.  The remaining reduction of another $304,297 would comeinto consideration in preparation of the 2014 budget. The first half year ofthat budget will be paid by the tax rate set now.*
If we wanted to maintain the current tax rate, thecouncil should have mandated a reduction in the current budget by $$304,297 anddirected the town manager to come back with the line item allocation of thosecuts in two weeks.
I can hear the blood curdling cries of outrage now. Well,it’s too bad. I was a manager for corporate budgets and controls for PaineWebber during the market crash of 1987 and we had to rapidly and drasticallyrevise budgets for a 25,000 member broker network and worldwide operations. Youdo what you have to do when you must live within your means. If Mr. Clarkdoesn’t want to do what the council mandates, assuming they have the intestinalfortitude to do it, then I’m sure that there is someone out there who can andwill.
Realizing the obvious, however, the current councilwill never exercise this kind of policy leadership.
Such willful blindness is made apparent by Mr.Cournoyer’s reference to the difficulties in setting a tax rate when assessingproperty values. A lack of a meaningful number of home sales has made thisdifficult in the recent past because they are used as a basis for determiningfair market value during reassessment. It certainly hasn’t been a result of alack of people trying to sell theirhomes – just drive around and look at the for sale signs.


Another way to illustrate what is happening to thetown is to look at the trend of the town’s excess levy capacity.Fiscal                Maximum                  Actual                       Excess
Year              Allowable Levy           TaxLevy               Levy Capacity2007                $13,574,309             $12,920,748                $653,6612008                14,041,680                 13,313,002                 728,6782009                14,632,367                 14,005,310                 627,0572010                15,243,912                 14,787,527                 456,3852011                15,785,204                 15,605,008                 180,1962012                16,391,899                 16,185,023                 206,8762013                17,070,177                 16,905,379                 164,798
The downward trend is a clear indication of adeclining ability of the tax base to continue to finance the growth of towngovernment.
The fact is noboby wants to buy or invest here. And,increasing tax rates are only going to further depress property valuesextending and deepening the death spiral in which we are already immersed. Ifwe don’t begin to act now to stem the drain on the tax-paying population whenwill we? When the $1,000,000 plus per year from the landfill stops?

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* This assumes an approximate level spending pattern over 12 months as well as a corresponding level allocation of funding sources. Otherwise, some expenses for the second half of FY 2013 have been "backloaded" to be financed entirely by an increase in the tax rate. In this case there would, indeed, be a need for an overall reduction of 2.6% in the balance of the 2013 budget in order to maintain the current tax rate of $17.83 per thousand.