WVN #414: Did improper procedure produce excess taxes?
- Dear Wayland Voter,
Are Wayland residents needlessly paying extra property taxes because of an obscure budget category that seems to have been handled with little oversight or public knowledge?
The question came to light as a result of a 2010 Annual Town Meeting vote authorizing the Abrahams consulting group to examine town and school accounting procedures and suggest improvements.
In a recent follow-up report Abrahams spelled out strict guidelines on the overlay account, money set side to pay property tax abatements and deal with exemptions and uncollectible taxes. The state also reissued its guidelines in the wake of the Abrahams Group finding concerning Wayland's unusually large overlay reserve.
Public records show that the town hasn't consistently followed required overlay procedures. The Abrahams report raises questions about how the amounts are set. There is no apparent record of substantiation or approval by any public official, raising questions of legality.
If Wayland's Board of Assessors doesn't spend the entire overlay amount reserved in a fiscal year, the balance can be declared surplus. Overlay surplus not appropriated by Town Meeting by fiscal year end is transferred to free cash, which the town has dipped into recently to stave off overrides. The questions begin here.
How did $1.175M grow to $1.677M?
The overlay for Fiscal 2011 was listed as $1.175 million in the spring 2010 Town Meeting warrant. Without explanation, the figure grew to $1.677 million on the Tax Recapitulation, the document sent to the state in November to determine the tax rate.
"When the budget was developed for town meeting, it was $501,000 less than on the Tax Recapitulation Sheet, which then creates a higher tax rate" Abrahams said. "Our scope did not include a review and audit of the Town's FY 11 Tax Recapitulation Sheet; however based on increased revenues (principally new growth and state aid the town had additional revenues."
It is too early to estimate the excess from the $1.677 million figure because some exemptions are still in process and some exemption payout amounts have increased. However, the total for exemptions granted, abatements resolved, and additional estimated exemptions and potential decisions by the state Appellate Tax Board for the FY 11 account was estimated at less than $500,000, according to a report submitted to Abrahams by the director of assessing.
Only the Board of Assessors has the authority to set the overlay amount. See:
But a posting on the Board of Assessors website states that the Finance Committee projects the overlay.
In letters to the Wayland Town Crier and elsewhere, some citizens have been asking why free cash has grown to levels that far exceed the Department of Revenue's guidelines of between 3%-5%. The percentage reported as of June 30, 2010 (the latest official figure) was 13.2.
Abrahams recommends: "The Town should have a policy relative to a special town meeting...as to how to utilize the additional capacity: 1. Reduce the tax rate, 2. Provide additional services, 3. Increase the overlay reserve only if the Board of Assessors presents basis based on actual history." This finding says that taxpayers should now consider holding a Special Town Meeting in November to reduce the tax rate.
The report also recommends that "the town present a revenue budget each year in the Tax Recapitulation format at the same time that the proposed expenditure budgets are presented such that there is a full understanding of the financial picture...We also recommend that the activity of $1.6 million in the overlay reserve (for this fiscal year) be reported no less often than quarterly and that a policy be developed to declare excess overlay as surplus to be transferred to the Reserve for Expenditures Released by the Assessors or to Free Cash at the end of the year."
The consultants cited Massachusetts Department of Revenue guidelines on "adequate and appropriate" overlay amounts. Since some property tax appeals may go on for years, the adequate amount can be a complicated matter.
"It is important that the Board of Assessors monitor overlay reserves and release that which is surplus," Abrahams says.
The updated Abrahams report is available at
Who Sets the Amount?
The Abrahams Group uncovered an overlay reserve that was set without evident approval by any public board, committee or public official for an unsubstantiated amount. The amount was added to the voted appropriation at Town Meeting, causing Wayland's property taxes to rise. Residents have asked whether state controls were circumvented when filing the town's Tax Recapitulation sheet, the document used by the Massachusetts Department of Revenue (DOR) to determine the annual tax rate.
The tow clerk's signature is required on the Tax Recapitulation sheet to certify that the appropriations correctly reflect the votes taken by Town Meeting. However, Finance Director Michael DiPietro signed this FY11 document, which determines the tax rate, on her behalf, apparently without her knowledge or consent. Additionally, in Fiscal 2010 DiPietro signed the Tax Recapitulation sheet on behalf of the Board of Assessors without their knowledge or consent. (The position of director of assessing was vacant.)
Ellen Brideau, director of assessing, signed the Tax Recapitulation sheet on behalf of the Board of Assessors in FY 11, without first showing it to the assessors.
By law, only the Board of Assessors votes to determine the overlay. The Department of Revenue reiterated its guidelines after the Wayland filing. See:
In order to approve the annual tax rate, the commissioner of revenue must first determine that the overlay budgeted for the fiscal year is reasonable, based on a three-year average of abatements and exemptions.
The Wayland Assessors' website attempts to substantiate an abnormally high FY 11 overlay number: "The Assessing Department received 398 abatement applications in February 2009, an amount that far exceeded the number of abatement requests filed in communities with similar numbers of parcels."
However after explaining that Wayland has an unusually high number of abatement applications, the information submitted to the state declared there were no pending abatement cases at the state Appellate Tax Board for any fiscal year. An analyst flag is automatically generated by the DOR for any figures entered under Potential Additional Liability (pending ATB cases). Before an overlay is approved by the the DOR, all analyst flags must be rectified.
Wayland reported zero pending ATB cases to DOR, effectively avoiding state oversight although pending ATB and state court cases were known for each fiscal year except FY 05. The result was the approval of the second highest overlay reserve in Massachusetts as a percentage of the tax levy, requiring an additional $1.7 million to be raised through taxation. This amount is typical of operational overrides in the past, but operational overrides are subject to taxpayers' vote. No such override vote was requested for FY11. The increase in the overlay reserve was made without any explicit taxpayer approval.
Once aware of the Abrahams Group findings, the DOR issued an order to ensure compliance in the future. However, no tax rate for any fiscal year may be changed after it has been approved.
At the Aug. 15 meeting of Wayland's Operational Review Committee, which was appointed to assess the Abrahams report, Finance Director Michael DiPietro was asked how the overlay figure was determined. DiPietro responded that he calculated the amount in conjunction with "elements of the Finance Committee." There is no apparent record of any public action related to this.
The Board of Assessors says it will review the overlay in September and work on developing better processes in determining the overlay. Taxpayers may want to watch for answers to questions including:
1. Precisely who calculated Wayland's overlay for FY 11?
2. Is it just coincidental that the overlay calculated for FY 11, supposedly based on a three-year average of granted abatements and exemptions and best estimates of liabilities, matched Wayland's excess levy capacity almost to the dollar? The excess levy is the difference between tax revenues allowed by Prop. 2-l/2 and those raised through real estate and personal property taxes.
3. Will the FY 11 process and overlay amount be investigated?
4. Will excess in the 2011 overlay, obtained without required procedures, be refunded to taxpayers through reduced taxes?
5. Will the Board of Selectmen follow an Abrahams recommendation to consider a Special Town Meeting to reduce the tax rate? In a $62 million town budget, the tax rate of $19.35 per $1,000 of assessed value would be reduced by a small amount..
-- WVN Staff
Editor's note: WVN contributor Molly Upton is a member of the Board of Assessors. The material presented here does not purport to represent views of the Board of Assessors.
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Wayland Voters Network
Michael Short, Editor