Pittsfield City Council Fight Over Free Cash Stalls Tax Rate
PITTSFIELD, Mass. — The City Council and mayor remain in a stalemate over how much free cash to use to offset the tax rate.
The game of chicken began two weeks ago when Mayor Linda Tyer brought forward an order asking that $500,000 in free cash be used in addition to $750,000 approved during budget negotiations. Her goal was to keep the residential rate below $20 per $1,000 valuation. But the increase to $1.25 million opened the door for councilors to demand more, with outgoing Ward 6 Councilor John Krol upping the ante at $1 million.
The mayor had countered with a compromise at $750,000, for a total of $1.5 million, and that's what she offered again on Tuesday.
"If this does not pass tonight it will continue to a special meeting so we can try again and then if that doesn’t pass we can try Dec. 10," Council President Peter Marchetti said. "If we can't get it to pass by then and bills cant go out by Dec. 31, the chips will fall where they fall."
The nearly 90-minute meeting was brought to a halt when Ward 2 Councilor Kevin Morandi called a charter objection that ended discussion. That launched the council into the tax classification hearing, which Marchetti immediately closed after councilors indicated that they did not want to hear a presentation based on Tyer's $1.5 million compromise.
Marchetti set a special meeting for Tuesday, Dec. 3, to try to set the tax rate.
Tyer's initial proposal to use $1.25 million in free cash would have set a residential tax rate of $19.99 per $1,000 valuation and a commercial rate of $39.96 per $1,000 valuation. That would mean a tax bill of $3,883 for an average single-family home valued at $194,288.
Originally some councilors wanted to see this $500,000 addition she proposed increase to $750,000 to further decrease the tax rate. However, the mayor was hesitant to go above $500,000 with hopes of making a hefty free cash deposit into the stabilization account.
The city has $6.3 million in free cash and $3.9 million in stabilization. The mayor and her administrative team have been trying to bulk up savings and reduce the reliance on free cash.
When she was unwilling to go to $1.75 million, she offered $1.5 million, forcing the council to vote on this amount, which it shot down with a 6-4 vote two weeks ago.
Using $1.5 million in free cash and a proposed shift of 1.6561 would yield a residential rate of $19.76 per $1,000 of valuation and a commercial rate of $40.47. That would translate to a savings of about $45 to the average homeowner over the initial tax rate.
The city's auditor, Thomas Scanlon, warned the council that moving beyond the first week of December without a tax rate would create problems. He said bills need to go out Dec. 31. He said if they miss this deadline they will have to look at borrowing.
The council then moved into the actual numbers and none were willing to change their position. Councilor at Large Melissa Mazzeo noted although the decrease is small and more symbolic, every little bit counts.
"It is a small, small amount but it is the right amount and the right gesture to make," she said.
Krol agreed.
"I think it is a fair opportunity now to give a little bit back to the taxpayers," he said. "When it comes down to it it is asking the mayor to do right by the tax payers with a little bit more."
Morandi felt the city has tapped free cash in the past to cover preventable deficits, specifically drawing $1.4 million of free cash to cover snow and ice deficit last year. He said this is not fair to the taxpayers.
"As far as I am concerned, it is the least we can do for our taxpayers. It is their money," he said. "We have the money. We would of had more if we minded the store better."
There were some voices in favor and Councilors at Large Peter White and Earl Persip saw the mayor's figures as a good compromise.
"This is a compromise we can't just deny everything because we want something," Persip said. "You may not like it, but true compromise is when two sides come together and both aren't really happy about it."
Ward 3 Councilor Nicholas Caccamo added that he wanted to be more mindful of the city's reserves. He said he did not want to be in a position where the city had to consider laying off staff.
"If the economy takes a dive and we don't have levy capacity left, we may have to think of laying off staff," he said.
Director of Finance Matthew Kerwood said he is less worried about next year but the years after, with economists predicting a recession that will slow down growth. He said the city is at its levy ceiling and can no longer raise taxes through an override.
"It should be to reduce the tax rate because we have to because we are at that $25 and we do not have the ability to do an override ... at that point if you are reluctant to put in reserves in order to get below that $25, now we start talking about reducing budgets and services," he said. "You can spend it now and save some money for the taxpayers or hold it in reserves and when we are in a position where we really have to use it, it is there."
He said if the council does not pass a tax rate and tax bills do not go out, the city will be in a "cash crunch." He said they will have to look at borrowing, slowing down spending, or reducing staff.
"We will have to manage this on an active basis to make sure we have the cash flow that we need to make sure that the doors of City Hall stay open," he said.
Scanlon said he would like to see the city's savings between 6 and 10 percent of its total budget and that, currently, it is on the low end of this. He also advised against using too much free cash to offset the tax rate.
Ward 4 Councilor Christopher Connell and Mazzeo thought between free cash and stabilization, the city had enough of a buffer. Connell said there will be $10 million with marijuana tax funds coming in.
Krol and Mazzeo were concerned over the process itself and Marchetti, citing City Solicitor Stephen Pagnotta, said the council can only approve or disapprove a mayoral order. If it is a budgetary item, as a council, they can only decrease the amount not increase it.
Mazzeo wanted to know when the city started responding to orders in this fashion and felt there was an imbalance of power.
"What is the law that says this has to be an order," Mazzeo said. "You are kind of hamstrung you either agree or you try to lower it. I find it frustrating."
Ward 7 Councilor Anthony Simonelli said he thought some "scare tactics" were being administered and was ready to continue the discussion into December.
"We work for the taxpayer," he said. "We are all here to work with the mayor, we don't work for the mayor."
Marchetti did note that if they do not the approve the use of more free cash, then they will be using different numbers that will yield a higher tax rate.
Only three councilors (Marchetti, Persip, and Caccamo) voted against continuing the hearing. The vote was 7-3 with Ward 5 Councilor Donna Todd Rivers absent.
Tags: fiscal 2020, tax classification,
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