CHATHAM — Though it’s still too early to predict the exact financial impact of COVID-19 on the next town budget, officials are bracing for significant reductions and are finding new ways to trim spending and lighten the burden on taxpayers.
Even so, the town's property tax rate will increase for the first time in three years.
At last Thursday’s board meeting, selectmen reviewed the latest revision of the fiscal 2021 budget before transmitting it to the finance committee for scrutiny. The operating budget, initially set at nearly $32.6 million, now stands at about $31.8 million. The capital budget, once $2.8 million, has been trimmed to about $2.3 million.
Finance Director Alix Heilala said it’s clear that local estimated receipts will be down significantly, given the anticipated losses in occupancy and restaurant meals tax revenue, along with motor vehicle excise taxes, beach sticker fees and various other revenue streams. Before the pandemic, local estimated receipts were pegged at just over $7 million, or 80 percent of the current year’s receipts. Heilala later lowered that forecast to 52 percent, but in consultation with the town’s financial advisors, she has increased the revenue prediction to 57 percent of 2020’s figure, or $4,772,349.
“And we’re comfortable with that number,” she said.
If those receipts come in higher than 57 percent, it will provide some relief in the fiscal 2022 budget, but not in next year’s spending plan. The actual receipts won’t be known until late in the fiscal year, after the second semiannual tax bill has gone out.
The loss of revenue will be made up through spending cuts and an increase in the tax rate. It will be the first increase in the tax rate in recent years. Largely because of increases in real estate values, the rate had declined each of the previous three years.
Some of the financial savings are coming from reductions or changes in warrant articles in the upcoming annual town meeting. While some projects have been deferred or scaled back, selectmen identified a few as priorities, like $500,000 for dredging. Severe shoaling at Stage Harbor will likely require additional dredging, and with the county dredge unable to do the job, the town expects to be paying market rates to private dredge firms. While dredging projects are typically borne by the tax levy, town officials agreed to fund the project from free cash to reduce the expected seven-cent tax rate increase of the expenditure.
Seeking to keep supporting working families, town officials opted to retain a $25,000 increase in the Childcare Network Voucher Program. Funded by the tax levy, the increase will add about one cent to the tax rate. The program is administered by Monomoy Community Services.
Before the pandemic, the Eldredge Public Library was expected to undergo $1.3 million in building repairs in the next budget cycle, with $206,200 coming from the Community Preservation Act and the rest being borne by the tax levy. The work is designed to address problems to the shell of the historic building, which have resulted in a leaky roof and other troubles. Town officials revisited the project to identify only the work that is absolutely necessary to prevent further damage to the building, and pared down the project to $701,800.
“It’s for those items which really can’t be put off, and will help secure the building,” Heilala said. After CPA funds are used, the balance of nearly $500,000 would come from the tax levy and raise the rate by seven cents.
To alleviate that burden, town officials consulted with the library board, which agreed to provide money from a pool of funds appropriated in 2018 for landscape improvements at the library. Re-purposing those funds for higher priority repairs to the building was an idea selectmen endorsed, and the change reduced the burden to the tax levy to just $52,000, or less than a penny on the tax rate. Town officials assured the library trustees that the landscaping funds will be restored in the future.
To further trim the FY21 operating budget, department heads were asked to identify areas where their spending plans could be further reduced, and as a result, an additional $726,118 in savings were found. The cuts included $124,844 from public safety, $160,000 in employee benefits, and $189,955 from the public works and facilities budget. The operating budget includes the same services the town is providing this year, with costs escalated to 2021.
The Monomoy Regional School budget assessment was also trimmed by the school committee. Initially $9.05 million, the town’s share is now set at just under $9.02 million. The $119,798 in savings comes from an increased use of the district’s free cash from its excess and deficiency account. The Cape Tech assessment remains steady at $304,877.
Spending on big-ticket items has also been further cut. The capital budget was reduced by $552,000 since Feb. 24, with the bulk of the savings – $317,000 – coming from deferred equipment purchases.
Before the pandemic, the town planned to tax about $37.2 million of the $38.4 allowed by Proposition 2½ , known as the levy limit. Responding to the projected drop in local receipts, town officials initially proposed using up the remainder of the levy limit, taxing up to the maximum allowed by law, which would potentially have raised the tax rate by 7.74 percent.
Since that time, Town Manager Jill Goldsmith and Heilala identified additional savings, restoring part of the excess levy capacity. Still, with the requirement to produce a balanced budget, and the goal of maintaining level services, the result will be an increase in taxes. For a single-family home valued at $800,000, the impact of the revised budget would be an increase of about $75; the owner of a $1 million home would pay $94. Those figures are based on the revised town and school budgets, which also reflect a decrease in the former Land Bank surcharge from 3 percent to 1.5 percent starting in FY21.
Selectmen unanimously voted last week to recommend approval of the revised budget, and to transmit it to the finance committee for further review before town meeting.