WILLIAMSTOWN, Mass. — The Finance Committee last week advanced a fiscal year 2024 budget that carries a projected 1.3 percent increase in the property tax levy townwide.

 

The Fin Comm went into its final weekly meeting of the FY24 budget cycle with one major decision point on its plate: whether to endorse a budget that included $100,000 in spending to bolster the town's stabilization account and an additional $150,000 toward capital projects.

 

The potential tradeoff of pulling that $250,000 out of the spending plan was that, without it, the town would have needed to raise $20.1 million in FY24 through taxation. With the additional outlays, the tax bill goes to $20.4 million.

 

Technically, the issue before the committee was whether to spend $250,000 from the free cash reserve on the stabilization fund and capital expenses or to apply that $250,000 toward general government operations.

 

Under either scenario presented by the town manager, the budget utilizes $1.6 million of a $1.9 million free cash account in the fiscal year that begins on July 1. The difference was that under one scenario, a quarter million of that spending went toward "paying down" the tax rate from free cash, also known as the unreserved fund balance.

 

In 2018, town meeting was asked to apply $475,000 in free cash to reduce the FY19 tax rate. In 2019, the number was $518,000 for FY20 spending. In 2020, it was $250,000 for FY21. Last spring, it was $230,000 for FY23.

 

There is no article on the May annual town meeting warrant approved by the Select Board on Monday night to apply any of the unreserved fund balance directly to the FY24 tax rate.

 

Had the Finance Committee chosen the path of applying the $250,000 to general spending needs (rather than stabilization and capital projects), the FY24 projected tax levy increase would have been a nominal 0.09 percent hike instead of the 1.3 percent from the path the committee chose.

 

Under either of the two scenarios presented by the town manager to the Fin Comm last week, the town still projects to have $250,508 in free cash during the next fiscal year to act, like stabilization, as a reserve for emergency expenses that come up during the year. Mid-year access to either stabilization or free cash would require votes from a special town meeting.

 

Free cash is, essentially, the result of overtaxation. It is the excess tax dollars that remain when a municipality spends less than it anticipates and/or raises more than it expects (through, for example, higher than expected user fees) in any given fiscal year.

 

At Thursday's meeting, Fin Comm member Fred Puddester argued against keeping the unreserved fund balance too high and suggested that the town's revenue projections for FY24 are too low, meaning that he expects the free cash to grow higher than the projected $250,508 during the year ahead. He also noted that the FY24 budget includes a $75,000 allocation to a reserve account controlled by the Finance Committee that the panel can release during the year for extraordinary expenses.

 

Town Manager Robert Menicocci made the case for not zeroing out the unreserved fund balance.

 

"We were going to keep our free cash at $250,000 and put another $250,000 into stabilization," Menicocci said. "That gives us a little bit of a backstop in that we're drawing down our free cash. And I would say … our role is, in terms of trying to establish a reasonable tax rate, is also to keep the ups and downs at a minimum, to try to have a consistent flow of what the tax bill is every year.

 

 "Going forward, I would share that we were fortunate this year. We had an unanticipated [property tax] windfall in terms of taxation with the Cable Mills apartments [going condominium]. Frankly, that surprised us. From a business perspective, we really thought the project itself would hold off on bringing those properties onto the tax rolls in the next year. … It's great for us, but it also means, into the future, that we have to be mindful of what is in the pipeline, which is not much. There's not much in terms of big projects that are in the ground."

 

Menicocci said the FY24 budget was designed to be lean, with realistic expectations on the expense and revenue side to avoid building back large free cash reserves.

 

The $250,508 remainder in free cash, meanwhile, was about allowing town officials to "sleep at night."

 

"If anything surfaces, we have some degree of access to that," Menicocci said. "If we spend it down, it's a lower tax rate, but that gives us less wiggle room here. With a higher tax rate, if we estimate in a good way that's favorable to us, that gives us potentially more money, too."

 

Puddester pushed back against one of the town's revenue estimates, saying the town's estimated rooms and meals tax revenue for the next fiscal year was projected "incredibly conservatively."

 

"Our estimate for a full year [in FY24] is less than half of this year [FY23] to date," Puddester said. "In 2022, our actual was $800,000. We're $600,000 halfway through this year. And you're budgeting $450,000. I think that provides a lot of buffer."

 

Menicocci said it was possible to see that kind of fall off, to which Puddester replied, "Does the Chamber [of Commerce] have data to back that up?"

 

The town manager said people in the hospitality industry in town have told him that bookings and receipts are trending down. And he noted that there are reasons why those rooms and meals tax receipts were higher the last couple of years.

 

"We definitely had a robust [2022] season," Menicocci said. "There's no question. As things opened up, people came out. We were especially attractive, I think, because we fell into that niche market during COVID where we were accessible. Folks could get here. The state's borders were a little more open than our neighbors. It was tougher to get into Vermont during some of that time. So we had healthy revenues.

 

"What I'm hearing, and we've seen for ourselves, and I don't know if it was a crazy winter with snow and how snow fell — as of Halloween, things were great, and then things dried up. It got extremely quiet for our restaurant folks and retailers, and we've seen in hospitality a similar dropoff. … We certainly have concerns about the offerings [in 2023] with the Theatre Festival doing something a little bit different. We're concerned about the economy; you're hearing today from the banking world there's some specter of some grim news of what they're saying in the economy."

 

Menicocci did note that projecting the rooms and meals taxes in March, before the summer season is "a crystal ball exercise."

 

Puddester remained unconvinced.

 

"I just find it hard to believe we're at $600,000 for half a year this year, and we're going to drop to $450,000 next year," he said. "I'm not opposed to having the buffer there. I think you have a really big buffer, and to have $250,000 on top of that in free cash seems like a bridge too far."

 

Both Fin Comm Chair Melissa Cragg and member Paula Consolini said they agreed with the strategy of keeping a quarter million dollars in the unreserved fund balance.

 

"I have to say, I would rather see our people sleep well," Consolini said. "Having been on this committee a long time and seeing what can go wrong … In this climate, as in climate change and other challenges, I hate to say it, but I feel like you have to be prepared for some of these things.

 

"I appreciate that Bob is new here, but his instincts to be careful are ones that I share."

 

In the end, the full Fin Comm voted unanimously to go with the scenario Menicocci recommended.

 

The budget passed by town meeting for FY24 will not have a property tax rate number attached. That tax rate is determined in late summer when the town finalizes its recapitulation, or recap sheet, which includes property assessments, expenses and non-property tax revenues, and submits the rate to the state Department of Revenue for approval.

 

The 1.3 percent projected tax levy increase cited last week comes from projections Cragg developed alongside Town Hall staff.