Select Board’s Goals include “considering” tripling CPA surcharge on tax bills, and more (Updated)

Above: The Town has used CPA funds to cover a lot of projects over the years. Now the Select Board and others are advocating for increasing taxpayer’s investment in the fund to better leverage state funding – with the stated long term goal of reducing overall property taxes. (scroll down for photo credits)

In my continuing coverage of what the Select Board hopes to tackle this year, I’m providing context on goals that were under “Finance”.

One of them includes “considering” an increased surcharge on tax bills that some board members pitch could reduce residents’ overall tax burdens.

The goals also cover contracting a grant writer and other administrative goals for better handling the Town’s finances.

As I previously noted, the June goal setting meeting was only in-person (not recorded) and minutes don’t provide discussion/context around the goals. So, I’m not entirely sure what board members’ intent is for all of them. But I can add relevant context based on other public discussions, votes, etc.

Increase CPA Surcharge to 3%

[Editor’s Note: A comment posted by member Kathy Cook clarifies that the board’s goal isn’t to increase the charge, but to consider pursuing the increase, and no formal vote has yet been taken. (That was not clear in their July 11th discussion, and as I mention above I was not able to hear their discussion when they adopted the goal.) Scroll down to below the post for her full comment. ]

The Select Board (or at least the majority) are seeking to triple the surcharge on tax bills that go into our Community Preservation Act fund, from 1% to 3%. Achieving the goal would require approval by voters by a Town ballot measure.

Each year, the state contributes a “match” to each Town with a fund. Towns that commit to the 3% maximum rate get a higher % match than those that don’t. The Advisory Committee has advocated that by increasing the state match, the Town could reduce the amount it has to pay for projects that would otherwise require bigger tax increases. The board has been supportive of the concept.

The messaging challenge for the board is convincing voters that future projects that qualify for CPA funding would be worth the downside risks, and that they can trust officials to use it to keep taxes down.

At the Select Board’s July 11th meeting, members spoke about the need to clearly communicate the intent. Chair Andrew Dennington noted, “It’s a big deal because it’s a tax increase.” Member Sam Stivers responded, “It could be, but if it’s done right it’s not a tax increase.” Member Al Hamilton rebutted, “Let’s call it what it is.” Member Kathy Cook countered that was why Hamilton isn’t one of the members assigned to managing the communications.

The plan discussed in February was to ask Town Meeting voters in the fall to put it on the ballot. Now that a Special Town Meeting won’t be held, it may wait for Annual Town Meeting. (The alternative is collecting 500 voter signatures.)

History, calculations, and value change over time

The vote to increase the surcharge will likely be put to voters 20 years after the 1% surcharge was adopted to go into the special fund that can only be spent on open space, historic resources, “land for recreational use”, or community housing.

At a February meeting, officials said that a Town Meeting Article for a 3% surcharge originally failed 51%-49%. But enough signatures were subsequently collected to put the 1% measure on the Town’s ballot, where it passed in 2004.

At the time voters adopted the surcharge, the state was matching 100% of the Town’s contributions. Over time that has decreased and fluctuated. Meanwhile, the cost to homeowners appears to have increased well beyond inflationary changes.

CPA surcharges are applied to the property taxes on the property’s assessed value after the first $100K is deducted. When the surcharge was passed, that $100K deduction represented a greater percent of home values than it does in 2023.

I looked at the Town’s appraisal history for a dozen homes, including ones around Southborough’s 2023 average home value ($830,300) and median home value ($730,800), plus at about ¾, ⅔, and 1½ times the median value. (Clearly, my spot check wasn’t a comprehensive analysis.** But I wanted to get a feel for how increased values have impacted CPA charges for homeowners since the initial Town Meeting vote.)

Between increased taxes and home values, the surcharges this year were 62% to 156% higher than owners of the same properties would have calculated in 2004 when it was up for a vote. (Most were around 90-110% increases.) For comparison, the cumulative inflation for dollar values since that year is 54.4%.

If projects can be pulled out of the annual budget/capital expenses to be covered by the CPA and reduce tax rates, then it could pay off. (So far, the only specific example I heard cited is no longer relevant.*)

Upside of an increase

The match varies by year, but involves multiple rounds of funding where each town receives a base % match and towns with the 3% rate receive more.

The amount awarded for the bonus funding is partially based on the qualified communities’ economic need ranking. Southborough’s is on the lower end of that, in the 8th of 10 “deciles”. In 2023, other Towns in that decile received from 46.4% to 56.9% matches, while those with a lower surcharge only received 38.51%.

Based on the lower percent, if Southborough’s raised CPA funds were tripled, we could have received close to $400K more from the state. (Although, the more towns that qualify, the less each town receives.)

There is an income-based exemption to the CPA, so tripling the surcharge wouldn’t add onto tax bills for those who have qualified to not pay it.

Potential Downside

The CPA figure isn’t usually included in public conversations about annual budget increases and impacts on tax bills when Town Meeting voters are voting on budgets and spending. I think it’s fair to wonder if officials will conveniently forget about the savings that were projected in the 3% CPA pitch when they defend “reasonable” tax increases down the road. (And at some point, Select Board members, Advisory members, and even the Town finance team will be a whole new slate of people with no ties to whatever promises are made this year.)

The charge would be included even in years when taxes are high and there aren’t any new CPA projects the community is interested in funding. Funds could accumulate without a clear necessary purpose. Later, voters could be convinced to support projects they wouldn’t normally agree to pay for because they are told the funding is available without impacting their tax bills.

(I can’t help but wonder which past projects might not have passed if voters had to agree to a tax increase or thought officials would soon be coming back to ask to replenish the coffers by increasing surcharges.)

Even if that doesn’t happen, it could be used in a way that provides long term financial savings but with near term higher costs. That would be unattractive to any voters (especially older ones) who think they may downsize/move before the strategy pays off.

Grant Writer

This goal states, “Develop plan for contracted service of Grantwriter(s); target focus area(s)”.

For years, Select Board member Sam Stiver has advocated for hiring a grant writer. He believed that there are enough grant funding opportunities out there that the position, which would include researching the opportunities and applying for them, would pay for itself.

Last year, the board debated turning the part-time Economic Development Coordinator position into a full time one that combined the two duties. The board decided against it, partially for budgetary reasons (and to avoid another benefitted positions). But there were also concerns about whether a committed grant writer would end up chasing grants that don’t make sense for the Town.

Then-member Chelsea Malinowski worried about time spent on grants that could end up costing the Town more — through commitments for financial matches or subsequent phases that are unfunded. (The board had been heavily criticized as having allocated too much of the Town’s road money on the St. Mark’s Street project because it was chasing a grant.) She argued for contracting grant writers as needed when opportunities are identified.

During the most recent round of the state’s “One Stop” grant applications, the board was informed that two applications the state advised would be competing for zoning review support funds or prioritize one. Given a pending deadline they decided coordinating a comprehensive application that combined the Planning Board/SHOPC and Economic Development Committee’s efforts would take too long. So they prioritized applying for a review of changes needed to increase Affordable Housing opportunities. (EDC’s review of changes needed to revitalize the Route 9 Business Corridor were tabled for a future round.)

That’s just one example of what the board wants grant writing for. Members have repeatedly opined there is a lot of money out there in grant funding for a variety of the Town’s budgetary and capital needs if they can successfully tap into it.

Bonding Pension Liabilities

“Assess Bonding unfunded pension liabilities; pursue special act”.

Ten years ago, I wrote about the board’s struggle to fund future non-pension retiree liabilities accrued over time. It’s not a situation unique to our Town, and Southborough has been making progress in putting money aside for the future expense.

On July 11th, the board spoke about the potential to borrow for the future payments when the interest rates are favorable. Members referred to having missed a past “window” that they wished they could have taken advantage of. Apparently the Town needs the permission of the state legislature to purchase bonds for that purpose. But unlike some petitions by towns that disappear in committees, the state house has a history of approving these requests.

The board plans to ask Town Meeting for authority to petition the state, then the state’s permission for the authority to purchase the bonds. Once that is in place, the board would be able to jump on opportunities when interest rates are low.

Financial Review

“Ask DOR (Dept of Revenue) to do combo financial management and financial policy review”.

Mass DOR’s Division of Local Services has a Financial Management Resource Bureau. Among the services it offers are:

Financial Management Reviews – Our comprehensive operational review of local accounting, treasury, collection, assessing, and overall administrative functions is designed to improve day-to-day management practices and procedures through specific, hands-on tools, guidance, and strategies for improving local government.

Strategic Planning, Analysis, and Benchmarking Studies – Our assistance focuses on strategies and opportunities to strengthen municipal financial operations by analyzing data, policies, procedures, workflows, staffing levels, job descriptions, and shared-service opportunities. Examples include capital planning studies, financial policy manuals, financial forecasts, budget documents, and financial indicator analyses. community comparison analyses, shared service analyses

At the July 11th meeting, Cook referred to the Select Board’s role for this goal as essentially done. Town Administrator Mark Purple listed it as one of his performance goals, stating that coordinating with the state and Town staff will take up a lot of his time this year.

Additional goals and tasks

The board’s other financial administration goals and tasks listed were:

• Reform Capital Equipment funding — Move to activity specific capital funds like the Town House account and the Building Capital Maintenance Fund
• Expand the financial projection model to 10 years to include the Neary school renovation/building project
• Additional tasks:
  • Identify 1-2 realistic new options for increasing non-tax revenue sources by end of December
  • Complete the designation of ARPA (American Rescue Plan Act) funds so that all funds have been committed by 6-30-24. (This is the approx. $3M that the Town determined it was entitled to in federal relief funds administered through the state. You can view my spreadsheet tracking the Select Board’s votes on allocations to date here.)
  • Build a Financial/performance Model of Dispatch Options (I already wrote about the board’s goals for dispatch, including comparing the options, here.)

*The majority of the Advisory Committee had pushed for Algonquin’s GonkPlex project to be delayed until after the CPA surcharge could be raised, to allow a higher state match. (Although, only $250K of the project was charged to the CPA vs the close to $3 Southborough is projected to be responsible for out of the nearly $8M project.) That didn’t happen, and officials have said CPA funds can’t be used to fund a project taxpayers already approved spending for.

**The homes that I looked at could have undergone some renovations over time, but none had a big enough year-over-year spike to indicate a major renovation was the reason for the increased property value.

Updated (7/26/23 8:52 am): A reader pointed me to a website that tracks CPC info statewide and for each community. You can find Southborough’s details here. It includes that I misheard the original Town Meeting vote which I initially wrote was 54-49. I was actually 51%-49% (and took place in 2001, the year after the program was launched).

Updated (7/26/23 11:12 am): A comment posted by member Kathy Cook clarifies that the board’s goal isn’t to increase the charge, but to consider pursuing the increase, and no formal vote has yet been taken. (That was not clear in their July 11th discussion, and as I mention above I was not able to hear their discussion when they adopted the goal.) Scroll down to below the post for her full comment.

(above images cropped clockwise from: 84 Main St pic by Alan Bezanson, trails project location on Google Maps, St. Mark’s Church clock tower pic on Facebook, Mooney Field lights from Facebook, Town House pic by Beth Melo, Library façade work pic from Facebook, golf course pic by Neil A. Theriault’s Facebook post, and Richardson Tennis Courts from a Town announcement)