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Municipal Finance in the Commonwealth Going Broke in MassaCHOASetts.

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Presentation on theme: "Municipal Finance in the Commonwealth Going Broke in MassaCHOASetts."— Presentation transcript:

1 Municipal Finance in the Commonwealth Going Broke in MassaCHOASetts

2 Remembering the SATs Analogy Question Kids are to Parents as Municipalities are to the STATE Just as parents dictate to kids the terms of the relationship, so too does the State to municipalities

3 It’s the same old story, same old song and dance, my friend(s) Expenses ↑ Employee Overhead Capital Revenues ↓ Local Aid New Growth

4 Believe me, one size doesn’t always fit all! Cities and towns have differing needs on the same issues, with cities generally requiring more revenue to support higher expenditures in: Public Safety Education Social Services Infrastructure

5 The Battle of the Chel’s Urban vs. Suburban Chelsea vs. Chelmsford Population 32,792 33,707 Median Income $30,000 $71,000 Budget $127m $101m Bud. Per Capita $3,827 $3,000 Police 97 49 School Pop 5,689 5,819 School Budget $69m $56m Bud. Per Pupil $12,198 $9,671

6 Not that there’s anything wrong with that! Chelsea vs. Chelmsford STATE Low Income 77.8% 6.4% 15.4 2 nd Lang Learners 83.5% 7.3% 30.7 OffsetsDifference Low Income $9.3m$0.8m $8.5m 2 nd Lang Learners $7.4m$0.6m $6.8m TOTAL $16.7m$1.4m $15.3m School Budget $69m$56m $13m

7 Show me the money Two Largest Revenues Sources: Local Aid & Property Taxes Urban communities are more reliant on Local Aid than others Some urban communities may be “over- reliant” on Local Aid, but Mr. & Mrs. Commonwealth won’t let us kids go out and hustle for ourselves

8 Why can’t we all be like Cambridge? 10 Largest Cities – Average Local Aid = 42% Budget (m)% Local Aid Boston $2,37525% Worcester55146% Springfield56256% Lowell30955% Camb47709% Brockton31548% New Bedford29449% Fall River24154% Quincy26816% Lynn25859% Chelsea12755%

9 Can a town get some love? 10 Largest Towns – Average Local Aid = 17% Budget (m)% Local Aid Framingham $22514% Brookline20809% Weymouth14324% Barnstable15710% Billerica12719% Arlington12016% Amherst 7024% Braintree11114% Chelmsford10116% Dartmouth 7620%

10 You’ve given me the XBOX and the PS3, but why can’t I have a Wii too? 10 Largest Cities – Average Local Aid = 42% (Lawrence: 69% - Newton: 07%) 10 Largest Towns – Average Local Aid = 17% (Concord: 6%) Significant driver of difference is School Aid (C’msford: 50% of LA is SA – C’sea: 72% of LA is SA)

11 Finally, some Pie with this PowerPoint?! ChelseaChelmsford Revenues

12 At least they didn’t pollute the harbor? Property tax revolt of the late 70’s & early 80’s led to the adoption of Proposition 2 ½ - Adopted in ’80 – Implemented in ‘82 Limits total taxes to 2.5% of overall valuation Limits growth to no more than 2.5% over last year (plus new growth)

13 When GROWTH comes up short Limits growth to no more than 2.5% over last year Chelmsford (72%)$71m X 2.5% = $1.8m, a 2% overall revenue increase Chelsea (25%)$31m X 2.5% = $0.8m, a 0.8% overall revenue increase Combined with dropping Local Aid, DOR says FY’10 municipal revenue growth is: Chelmsford: up 1.9% - Chelsea: down 1.5%

14 Fairy tails, come true, it could happen to you, if you’re a town at heart Prop 2 ½ does allow for an override, allowing voters to increase property taxes Overrides are almost an exclusively town financing tool (“Budgeting by Override”): Since 2000, of the approx 1,200 overrides placed before voters, 5 were proposed in just 2 of the State’s 45 cities (3 -Brockton ’08: loss), (2 – Northampton ’04: loss - ’09: win) Small towns are most likely to propose and adopt overrides, like Aquinnnah (42: 14-28), West Tisbury (39: 26-13) and Tolland (30: 13- 17) Affluent Concord is 19-2 this decade, raising almost $9m more in tax revenue for local needs – Chilmark is 14-0 this decade and 35-5 since 2 ½ was adopted

15 The Emperor has no clothes (are we all “Karma Chameleons”?) Problems with Prop 2 ½: 1. Huge increases in Local Aid masked the fallout from revenue restrictions caused by 2 ½, but those days are as distant as a Boy George hit 2. Huge increases in values hasn’t translated into that same increases in tax revenues 3. Prop 2 ½ limits haven’t keep up with inflation 4. There’s no concurrent limit on expenditure growth

16 I should have managed in the 80’s 1. Once covering up Prop 2 ½ shortfalls, declines in Local Aid are now exposing the system’s flaws: Combined Non-School Aid (Lottery and Additional Assistance) by decade since the adoption of 2 ½ Increase ’81-’90425%!!!!! ’91-’00 7% ’01-’10(22%)!!!!!

17 Spin Alert: Don’t you hate when facts get in the way of a good point? Including School Aid, total Local Aid in the 3 major categories over the last three decades: School Aid Non-SchoolTotal ’81-’9054%425%144% ’91-’00135% 7% 49% ’01-’1039%(22%) 29%

18 How about a little somethin’ for the effort! 2. Huge increases in property values haven’t produced a concurrent effect on tax receipts Value Increases Tax Increase Statewide ’00-’09up 122%up 63% Lowell ’00-’09up 157%up 54% (Chelseaup 172%up 64%)

19 Slip-sliding away 3. Prop 2 ½’s 2.5% allowable increase hasn’t kept up with inflation Since the adoption of Prop 2 ½ in 1980, inflation has exceeded 2.5% in 22 of 29 years Average inflation has been 3.9% (1998: 1.55% - 1980: 13.58%)

20 If I have to take the cake, can’t you allow me to eat it too! 4. Prop 2 ½ limits the revenue side, but not the expenditures General Inflation (3.9% vs. 2.5%) Cost of maintaining aging infrastructure Employee Benefits – in Chelsea, up 100% this decade, with employment level down 7% (and declining)

21 Health Insurance is sickening Health Insurance up an average of 14% annually

22 Thank you, sir! May I have another? FY’10 is another in a long line of financially stressful years for cities in towns Historic Cuts In Local Aid – Chelsea ↓30% - with overall revenues ↓5% (decade ave. ↑2% a year) Chelsea impacts (non-school): ½ of the municipal depts. budgets reduced Another 20 positions eliminated: ↓20% from ’02 Fees and fines raised again Capital investment deferred again Reserves continue to decrease Total revenue loss supporting non-schools: 15%

23 The Benevolent Dictator says: What needs to be done is: Health Insurance relief Pension reforms Regionalism coordination Charter School financing reforms Continued support of Ed Reform As well as: New Local Aid commitment – Partnership Aid Recalibration of Prop 2 ½ Consolidation of jurisdictions (under a Benevolent Dictator!)

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