WVN #415: Awash in cash
- Dear Wayland Voter,
Citizens continue to raise questions about Wayland's huge percentage of cash on hand -- millions more than needed to meet expected expenses in the budget.
At the start of the 2012 fiscal year on July 1 Wayland's coffers held $10.305 million in "uncertified free cash," nearly 15 percent of the town's operating budget. Free cash is up 21 percent from $8.5 million a year ago.
Meanwhile, the current operating budget is about 7 percent higher than the previous year's. Could taxpayers have been spared some or all of that increase?
How does Wayland compare with other towns in free cash?
Massachusetts Department of Revenue figures posted online for Fiscal 2011 showed Wayland at 12.36 percent and Concord at 10.6. No other comparable town is close: for example Weston was at 5.4, Sudbury at 0.3 and Medfield at 2.58.
Naturally, municipal officials must prepare for the unexpected. But some Wayland citizens contend that beyond a certain point free cash means extra and unneeded taxation for residents.
Effect on taxpayers
How much excess taxation? This is one way to look at it: Assuming Wayland has roughly 5,000 taxable parcels, a budget padded by $2.5 million beyond reasonably expected needs would extract an average of $500 from each owner.
Another hypothetical: If half of the free cash were applied to the current budget, the average Wayland residential property tax bill of $11,471 would be reduced by about $860, still leaving a percentage of free cash within state and bond rating guidelines.
The picture is complicated because free cash isn't the only possible source of over-generous reserves. Municipalities carry Stabilization Funds, which you can think of as rainy day funds, and in Wayland there are Water Department surpluses. Another category was the subject of a guest column by the Board of Selectmen in the Sept. 8 Wayland Town Crier that began, "Recently, the town's overlay account has been the subject of much discussion. Questions have been raised as to how it is set, how much is set aside annually and how much remains from past years."
The overlay account is money set aside to pay for property tax abatements and tax credits for seniors and others. There are variations in abatement requests from year to year, and some appeals to the state Appellate Tax Board may not be decided for years.
The overlay became a part of public discourse only when consultants hired to examine town and school financial procedures called attention to Wayland`s unusually large overlay account. (WVN summarized this complex subject in Newsletter #414 of Aug. 23,
"Did improper procedures produce excess taxes?")
The selectmens' Crier column was headed "Facts on the overlay reserve" and purported to reassure taxpayers that any problems will be resolved soon. Despite the matter-of-fact tone, the column raised the ire of two elected assessors with a combined total of more than 20 years of service, who accused the selectmen of acting unprofessionally and publishing erroneous information. More on this below.
A Town Crier guest column on Sept. 22 by Tony Boschetto, a CPA, financial executive, Wayland resident and school parent, suggested that various surpluses, including school funds, have amounted to $15-20 million over the past few years, an average of up to $4,000 per taxable parcel. Town officials would undoubtedly challenge that figure.
Boschetto offered several recommendations, including holding a special Town Meeting in November to vote on reducing the tax rate. This "underride" vote would be a novelty in Wayland, which approved frequent operational overrides beyond Proposition 2-1/2 limits until the economy stumbled.
A draft budget document prepared by Finance Director Mike DiPietro presented at the Finance Committee's Sept. 12 meeting showed a "turnback" in unexpended funds of $2.527 million from Fiscal 2011. This budget projection document estimates a surplus of $1.225 million from FY 12. FinCom Chair Cherry Karlson cautioned that these are projections made in the early part of the current fiscal year.
A large portion of the FY 11 excess resulted from budget overages in utilities for both the town and the schools as well as "exchange/carryforward" in the schools. These amounted to $881,733. The second largest amount was $337,904 for unpaid salaries for open positions. Most of these have been filled. Converting to "pay to throw" at the transfer station resulted in increased recycling and $112,272 savings in disposal fees. In the future, the transfer station's operation will be managed in a revolving fund and will not be included in the town's budget.
While members of the Finance Committee are considering using some free cash eventually to defray all or part of the permitted 2.5 percent rise in town budgets, they did not entertain a suggestion offered during public comment to hold a special town meeting this fall so that voters could decide whether or not to reduce the 7 percent increase in the FY 12 budget.
Historically, additions to free cash are not recurring events, so towns are generally cautious about spending free cash for the operating budget. Most of this year's 7 percent increase is debt service for the new high school.
Members of the Finance Committee also are looking at budgeting items more closely. Finance Director DiPietro said he prefers a margin enabling him to come in under budget.
Discussions during FinCom meetings on Sept. 12 and 19 included a wide range of suggestions for using some free cash. Some suggestions were to use cash to prepay debt and/or pension obligations as these would ultimately result in savings. Other ideas were to use free cash carefully to ameliorate tax increases. Member Richard Stack requested a look at the impact on the tax rate with various scenarios for free cash use. Member Tom Greenaway said that residents had contributed to the buildup in cash in the past but might not see the results if the funds were used for prepaying long term obligations.
DOR vs Moody's on Free Cash
Currently, the ratio of free cash to the town operating expenses is 14.9 percent. The FinCom said in annual town meeting warrants in 2009 and 2010 (page 9) that the Moody's bond rating agency prefers to see free cash represent 5-10 percent or greater of a town's operating expenses. The FinCom also stated in the 2011 Annual Town Meeting warrant: "The Finance Committee‟s long-range plan anticipates the judicious use of free cash reserves through FY2015 to offset the impact of expense reductions and mitigate property tax increases to residents."
A Moody's document indicates the town told Moody's it strives to maintain a minimum of 5 percent in free cash. The Massachusetts Municipal Association says the Department of Revenue (DOR) recommends free cash in the range of 3-5 percent.
Waylanders have the fifth highest tax rate in the state and possibly the highest percentage of free cash.
Prior Free Cash Use
Wayland has applied free cash to defray budgets in the past. In FY 04, $2.4 million; FY 05, $1.869 million; FY 06, $300,000; FY 07-09, $0; FY 10, $1.1 million; FY 11, $250,000; and FY 12, $2.01 million).
Wayland's free cash wasn't always so healthy. In FY 2006, free cash was 2.2 percent, and Moody's placed a negative outlook on the town's Aaa bond rating. Since then, the town has had at least $6.2 million in operating overrides, which helped replenish the coffers. Additionally, the town has had several debt exclusion overrides.
Assessors rebut selectmen
Current assessor chair Jayson Brodie and former chair Susan Rufo criticized the selectmen for their Sept. 8 guest column in the Wayland Town Crier about the latest overlay account. During public comment at the Sept. 14 selectmen's meeting Brodie, reading from a prepared statement, decried as unprofessional the way the column was published. Selectmen must have known that some of the content was false or misleading, Brodie said, but they failed to consult assessors in advance and then ignored the assessors' request to hold publication until corrections could be made. The statement didn't specify the assessors' objections.
Brodie and Rufo, the longest-serving members of the Board of Assessors, apologized for not being aware of their board's sole jurisdiction to determine the amount of the annual overlay allocation, as WVN reported in Newsletter #414. They questioned who in fact has been making overlay decisions for the past decade. Brodie assured the public the Board of Assessors is now in full control of the process.
Later in the meeting Selectman John Bladon, who drafted the column, contended it was accurate and had been vetted with the Finance Committee and the Assessors' Department. Town Administrator Fred Turkington said he took some responsibility for what had happened, pointing to a sentence referring to high overlay amounts set by the assessors. But in fact other officials -- not the assessors -- have set the overlay for at least a decade.
Three other selectmen indicated they assumed the column was accurate and had been vetted with the Assessing Department.
When the Board of Assessors met on Sept. 19 to discuss the overlay and overlay surplus, resident George Harris spoke during public comment, criticizing the "worst case scenario" approach used at the previous meeting to evaluate the amount needed in the FY12 overlay. Assessor Bruce Cummings interrupted and objected to Harris continuing.
-- WVN Staff
Highlights from the Sept. 14 Selectmen's meeting:
-- Selectmen and the Housing Authority voted unanimously to appoint Kevin Goodwin to fill the vacancy caused by Charlie Raskin's retirement from the Housing Authority.
-- Selectmen announced this fall's "State of the Town" forum for Wednesday, Oct. 19 at 7 p.m. Presentations will be made by selected town officials about major capital building projects on the drawing board during the next decade. Small group discussions will give residents a chance to share views and priorities.
-- Selectmen voted unanimous support for electronic voting for next spring's Annual Town Meeting. More information about the ELVIS 2.0 subcommittee's work is posted on the town website.
-- Miscellaneous: Selectmen voted unanimous support for the town to apply for a substantial sidewalk grant to enhance safer pedestrian access and connectivity in the center of Wayland. They also reported progress in ongoing negotiations with Twenty Wayland, LLC, the Town Center developer, towards completing complex legal agreements regarding the town's new wastewater treatment plant and the eventual closure of the town's existing plant. Town representatives will meet with Department of Environmental Protection officials on Sept. 26 to discuss options for additional groundwater discharge for the plant.
Wondering what has happened to live cable TV broadcasts of selectmen's meetings on Monday evenings? The selectmen's meeting room is being redecorated. While new carpet, draperies and furniture are being installed, WayCAM is not able to broadcast live from Town Hall. WayCAM volunteers continue to record meetings for rebroadcast and for posting on its Video on Demand archive:
UPCOMING MEETINGS (check town website calendar for more info):
-- Monday, Sept. 26: Selectmen/FinCom/Assessors joint meeting about the overlay, 7 p.m. Large Hearing Room.
Recreation/Board of Public Works joint meeting about athletic fields, town beach, etc., 7:30 p.m., Town Hall
-- Tuesday, Sept. 27: Dudley Area Advisory Committee, 7 p.m.: Tighe & Bond stormwater and sewer presentation; other agenda items about Dudley Woods/Doran Road town-owned land.
-- Sunday Oct. 2, 2 p.m., Grout-Heard House. Peter Gossels, who recently retired as town moderator after three decades of service, will discuss the history of Wayland's Town Meeting.