CHATHAM – In the coming weeks, selectmen will face a number of policy decisions that will impact the shape of next year's annual budget.
As presented by Town Manager Jill Goldsmith and Finance Director Alix Heilala at last Tuesday's annual budget summit, important policy decisions include capital spending levels; service expansion or reduction; revenue expansion; use of funds from the sewer intermunicipal agreement with Harwich; debt management; and waterfront facilities priorities.
Heading into the fiscal 2019 budget process, with stable revenues, robust new growth and a low tax rate – one of the lowest in the state, Heilala said. Finance committee members, who attended the session, along with Chatham's Monomoy School Committee representatives, expressed concern about the sustainability of the budget's growth rate over the past several years as well as debt levels.
No specific numbers were presented for the fiscal 2019 budget, but Heilala ran down the figures for the fiscal 2019 budget, which saw a $30 million operating budget, up 3.8 percent over the previous year; $9 million for schools, a 3.7 percent increase; and $2.9 million in water department expenditures, up 8.3 percent.
The town's total property valuation increased 5.1 percent this year, which led to a tax rate decrease of 3.28 percent to $4.87 per thousand. The average tax bill is $4,478, Heilala said. Property taxes represent 72 percent of the town's revenue, with fees and other taxes – such as the rooms tax, which continues to climb – making up the remaining source of funds.
Revenue increases in next year's budget will come from new growth – new homes and other property improvements that increase values – which was more than $500,000 this year, but will be conservatively pegged at half that for fiscal 2019; and local receipts from fees and other taxes, which is estimated at about $6.3 million, about 84 percent of the prior year's level, Heilala said.
Debt payments are leveling off, and Heilala acknowledged that although the town has “quite a high level” of debt, with payments constituting just over 20 percent of general fund expenditures, the Standard and Poor rating agency has said the level is acceptable to maintain the town's AAA rating. Maintaining that rating is an important budget goal, she added.
Finance Committee Chairman Stephen Daniel noted that the town's per capita debt is the highest in the state except for Provincetown, but Goldsmith said major factors in that are the town's investment in wastewater and town facilities; other than a new senior center, the town's building needs have been largely taken care of in the past several years.
“We do have a lot of debt drop off in the future,” Goldsmith said, but as the town continues the sewer project, new debt will take the replace of that retiring debt, which will keep debt levels stable and won't add to the tax rate.
“We want to avoid spikes in the tax rate and keep it level,” Heilala said.
That also means that taxpayers won't reap the benefit of the debt drop off, said finance committee member Jo Ann Sprague.
“Is it considered old fashioned to think that when we have debt drop off that should go back to lower the tax rate for the citizens?” she said.
It's been several years since selectmen set the debt drop off policy, Daniel said, so it may be time to revisit it.
For the past several years selectmen have endorsed a level services budget, which doesn't mean that costs stay the same, as some, like health insurance, continue to rise, noted Selectman Dean Nicastro. Even though the tax rate went down this year, many people saw increases in the value of their home and will have higher tax bills; they have an expectation that they will continue to receive adequate services, he said, sounding a “cautionary note.”
“There may be some areas where we may have to look to hire additional personnel” to maintain those services, he said. One example is the recently discussed mooring officer.
Heilala noted that the town has an excess levy capacity of more than $2 million, referring to the difference between the amount of property taxes the town could legally raise versus the amount it chooses to raise. Whether to tap that excess levy capacity, which would increase the tax rate, is a policy decision up to the board, she said.
Goldsmith said she'll also be asking the selectmen to prioritize waterfront infrastructure spending; $11 million was approved at this year's town meeting for numerous projects over the next five years. The board will also have to decide where to allocate the $6.8 million Harwich will pay Chatham over the next 20 years as part of the intermunicipal agreement allowing East Harwich wastewater to be treated at the Chatham sewer plant. Goldsmith said the initial payment of $2 million is already in the town's bank account.
Daniel suggested officials look at the level of capital spending. The policy has been to use free cash and limit capital expenditures to 3 to 7 percent of the operating budget. With inflation at less than 2 percent, officials also need to consider if the overall growth rate of town spending, which was about 3.8 percent this year, is sustainable, he said.
However, he said the budget summit, the sixth, provided a “good start and lots to think about.”
“This is a very healthy start,” agreed Chairman of Selectmen Cory Metters. “We clearly have a full plate on our hands moving forward.
Department heads will be assembling budgets during the next few weeks for submission to Goldsmith by Nov. 9. She'll deliver her recommended budget to the board of selectmen and finance committee on Jan. 11, and the school budget is due Jan. 15. The finance committee will make its recommendations to selectmen Feb. 9. Selectmen will vote a budget by Feb. 27, with final fincom recommendations due March 23. The budget will go before voters at the May 14 annual town meeting.