ORLEANS — An override of the tax levy limit in the fiscal year beginning July 1, 2022, will be needed to maintain the current level of services, Town Administrator John Kelly told the board of selectmen Oct. 2.
With declining revenue from the beaches and hotel/motel tax receipts being shifted to a stabilization fund to help pay wastewater costs, and anticipated higher costs for factors such as benefits and utility expenses, Kelly is recommending a 4 percent cap on school and non-school operating expenses for the fiscal year that begins July 1, 2020 (FY21). The budget for that fiscal year will be reviewed in the next few months and voted on by town meeting in May.
“There’s a significant shift in the availability of non-property tax revenue,” Kelly said, “namely the lodging tax we historically collected for motels and hotels at 4 percent, $235,000 a year. Town meeting voted to put that with the (new) short term rental (revenue) in the stabilization fund. (Also), beach receipts have dropped, an estimated $134,000. Those two alone put us at $370,000 of revenue not (coming in).”
Towns are allowed to raise their levy limits no more than 2 ½ percent annually plus a factor for new growth. Debt exemption votes raise the limit during the lifetime of projects, but a general override, usually addressing operating expenses, continues in force unless the limit is reduced by a future “underride” vote.
“We have $370,000 less revenue,” Kelly said, “but operating expenses are staying the same. We’re going to run out of unused levy capacity” by FY23.
During preparation of the current year’s budget (FY20), Kelly had invited department heads to list and prioritize unmet needs that could be addressed if extra funds were located. He’s not extending that invitation for the FY21 budget.
“Given the reality of where we are, we need to focus on maintaining what we have,” Kelly said. Going beyond the status quo would be possible if new sources of revenue were identified, but he noted that these would have to be recurring rather than boosts for a year or two. “The reality now is that we have to focus on our core areas,” he said.
Kelly said Finance Director Cathy Doane maintains financial plans for the town 10 years out, and that these had included the possibility of a general override five years in the future. Now it appears that reckoning will come in FY23.
“My recommendation is to look to increasing revenue that we can count on, that’s recurring,” said Kelly. “One-shot revenue helps to some extent, but when funding the operating budget you have to have sustainability.” He said the board might look at the town’s fee structure again “given the pressures we have at our beaches to increase expenses related to safety. We’re seeing a reduction in everything from the off-road vehicle program to daily parking. The operation is running further and further in the red.”
Although it had the near-unanimous support of the selectmen and finance committee, a town meeting article calling for a $25 seasonal parking sticker fee for residents was indefinitely postponed by voice vote at May’s town meeting. Last week, Selectman Cecil Newcomb asked if there were any plans to ask again.
“The board has to have some discussions,” Kelly said. “Maybe the voters need to be given a choice. We give away 8,000 beach stickers (to residents). If you charged $25, that’s $200,000. We need $200,000, either (from) a beach sticker fee or an increase in taxes.”
Selectman David Currier said he doubted that the town would be able to sell 8,000 stickers to residents. He said he has four of the free stickers, but “I would never get one” if there was a charge.
Even if fewer resident stickers were sold, Kelly noted, “you’re freeing up paid parking at $25 a day. The capacity is the same; potentially, you’d have more daily parking fees. Maybe the board decides to limit the number of beach stickers per household to two, or whatever it is.”
The proposed budget policy for the fiscal year beginning next July 1 will be back on the board’s agenda for approval Oct. 16. Department managers’ budgets are due to Kelly by Nov. 15, and his recommended spending plan will be delivered to the selectmen and the finance committee for review Jan. 15. A series of public hearings on the operating budget and the capital spending plan will follow.