Property values and tax rates

There seems to be a common misconception that a homeowner's property tax bill increases because their property valuation has increased. Not so!
Property tax bills will generally increase each year, even if the overall value of all property in town were to decrease.
The tax bill is determined largely by the Town budget, appropriated by voters at the Annual Town Meeting. A large portion of this budget is funded by property tax revenues. The total amount of taxes to be collected in a year (the tax "levy") is spread across the property owners in town based on the value of each property. A new "tax rate" is set each year, which determines the tax to be paid for each $1,000 of property value. This rate is calculated by dividing the total tax levy by the total value of property in town (with some adjustment to charge slightly different rates for residential and industrial properties). So if the tax levy goes up, the average tax bill must go up, regardless of how property values have changed year to year.
Historically in Andover the property values have increased faster than the tax levy, so the tax rate has generally gone down each year over the past decade. In FY1995, residential property owners paid $16.06 per thousand dollars of property value, but by FY2007 this rate had reduced to $11.25. The average property valuation more than doubled in that same time period ($227,300 to $591,800) so even though the tax rate decreased, the average tax bill increased 82% in that same period.
So don't get mad at your property assessment each year, thinking that it's the culprit causing your tax bill to rise! Unless your assessment has risen more rapidly than comparable properties in town, you will be paying approximately the same portion of the overall tax bill as you did in previous years. Of course, if you think your assessment is out of line with the valuation standards, your tax bill will be reduced if you sucessfully challenge the valuation get it decreased.

Want to post your own thoughts?

The goal for this blog is to stimulate thought and discussion within the Andover community, and allow residents to exchange their views.
Please feel free to response to existing posts with your comments, by clicking on the Comment link at the end of each post. Comments can be submitted anonynously, or you can include your name.
If you are interested in posting your own ideas and views on this blog, I would be happy to add you as an author! Just send me an email at:
mark@mwmerritt.org

Plugging the hole?

Governor Duval Patrick released his proposed FY09 budget last week, giving towns and cities a first glimpse at the levels of state aid they may be receiving next year.

The state aid to a town consists of roughly 17 distinct line items, many being earmarked for specific use within town (notably the Chapter 70 aid which is dedicated to the School Department budget). The various elements of the state aid package (and the charges, or 'assessments', which the town must pay back to the state) are detailed in the Cherry Sheet.

Largest 'general government' component of the state aid is the Lottery Aid - a portion of the state's lottery profits distributed to cities and towns to help fund their annual budgets. State Lottery revenues have been weak in recent years, so this important element of aid has been at risk. In Governor Patrick's statement regarding the budget, he notes:

We are protecting cities and towns from what would otherwise be an anticipated $124 million deficit in the State Lottery Fund, plugging this hole with license fees the state would receive from my proposal to create three destination resort-style casinos.

The Lottery Aid to Andover this year was $2.2 Million. The Governor's proposed budget would result in this same level of Lottery Aid for next year (which is the level assumed by the Long Range Financial Planning subcommittees in projecting the town budget deficit for next year). If the Governor's concepts for introducing gambling casinos is not approved (or is delayed) by the state legislature, then Andover's Lottery Aid will be reduced by approximately $295,000.

It seems that Andover would be prudent to plan on NOT receiving this $295K in Lottery Aid this year, despite the Governor's apparent confidence that his casino proposal will be successful...

Soapbox at Eagle Tribune

Click here to view site

The Eagle Tribune has a blog page for editors, called the "Soapbox". The link above shows the entries posted under the topic of "local politics", but you can easily navigate from there to the entire list of postings.

Why wait to settle contracts?

Andover teachers rallied last week to protest for a timely settlement of their contract negotiations. Selectmen Brian Major has suggested that it might be advantageous to delay contract settlements until after Town Meeting, while School Committee member Deb Silberstein strongly opposed this suggestion. Taylor Armerding recently posted his views about this debate on The Eagle Tribune 'Soapbox' (click here to see it) and I responded as follows:

I see some practical benefit to settling some of the larger bargaining unit contract negotiations prior to Town Meeting.
The financial tradeoffs and uncertainties that voters must consider are complex enough without adding further ambiguity from unsettled negotiations.

Andover voters indeed make the final decision about how much they will be taxed for the services they desire, but it has not been the town’s practice to ask voters to explicitly decide the level of salary increase that bargaining units should receive.

I suggest that the designated negotiation teams should strive to reach fair and equitable agreements, and that town voters should decide what services they are willing to pay for - having a clear and realistic understanding of what those services really cost.

Andover voters have a recent history of denying requests for operating budget overrides, yet approving appropriations for increasing numbers of staff. Even if barganing units were to agree to zero salary increase for the next three years, the current financial predictions indicate that there would be insufficient revenues to sustain the current number of employees and associated services without an override.

While salary increases can certainly have a significant impact on the magnitude of the current budget deficit, the contract negotiations are not the key financial issue facing Andover voters. The key issue is how much to increase revenues (through fees and property taxes) and/or decrease staff and services across all the departments of the town.

Coffee-shop talk

In an article in today's issue of The Eagle Tribune (click here to read the full article), Bill Pennington describes the need to provide town voters with the budget information they need to make good choices at the upcoming Town Meeting:

"My whole thing on this is, we've got to look at the options and get the information out to the citizens," Pennington said. "They have to understand the consequences of their actions. Until those options are laid out before them, this is coffee-shop talk."

I admire Bill's conviction and dedication to this effort, and share his sense of urgency to get information flowing to - and amongst - the concerned citizens regarding the strategic budget choices they will be called to make in late April.

In fact, Bill's comment sums up my motivation for creating this blog last week, and for trying to put in enough content to start to attract some interest.

While I agree that the budget planning officials (on the School Committee, Board of Selectmen, Finance Committee, Superintendent of Schools, and Town manager) should make every effort to disseminate the data, analysis, projections and conclusions they have been working so diligently to prepare, I also believe that the community needs to find ways to discuss and share their thoughts on the choices and tradeoffs they collectively face. While our elected leaders are charged with defining the issues and choices, and making their recommendations, the registered voters are ultimately responsible for deciding the financial paths that the town will elect to follow.

Andover Forum website

Click here to visit the website.

The Andover Forum website was created in 2003, in an effort to provide an online mechanism for residents to raise issues and conduct discussions on a variety of town issues. Despite the good effort put into the creation and launch of the Forum, it didn't get a great deal of use. The last post was in early 2004.

The forum can be read by anyone, but posts can only be made by registered users (registration merely requires having a library card).

Andover Finance - on Google Groups

Click here to access the group site.

I recently created a Google 'Group' for topics related to finance in Andover. This site allows visitors to begin and contribute to discussions on any financial topics of interest to them. It also has an area for storage of documents (such as Finance Committee meeting agendas and minutes) and pages of information about the financial operation of the town.

Related web sites and resources

As I encounter other web sites that might be relevant to people in Andover, I will post a description in the blog. Each of these posts will be tagged with the label "websites", so that readers can easily extract the complete listing of these posts.

Budget "drama"

The Eagle Tribune published an editorial in today's paper titled "Andover school budget needs analysis, not drama" (click here to view the editorial). The drama in question was played out last week at meetings of the School Committee (Tuesday) and the Long Range Financial Planning subcommittees (Thursday), where school leaders and parent advocates expressed considerable frustration at the apparent lack of support from other boards for a Proposition 2 1/2 override.

At issue here, I believe, is really a difference of opinion on how best to equip Andover voters with the information they need to make informed decisions about their choices for the FY2009 budget.

Some proponents of increased taxation (above the Proposition 2 1/2 limit) seem to feel that voters need to see unified advocacy from the full spectrum of town and school leadership, along with a town-wide fiscal plan that has an override "built in" as a fundamental assumption. Other proponents (and certainly some opponents) claim that voters need to have a detailed accounting of expense and revenue data, with different alternatives carefully modelled and analyzed in order to make wise choices.

Speaking for myself, I sense that a great many of the voters in Andover need both of these inputs to make their best decisions. As a voter in town, the judgements of elected officials and senior management are very important and valuable inputs to my decision process, but I also need the background information necessary to come to my own conclusions.

The town is facing quite serious choices this year, to decide how much to increase taxes and/or decrease services. The choices made will likely have long-term impacts on the operation and character of the town. Leaders should be actively communicating their views, and the detailed facts and projections that support them. Concerned residents should be asking their town and school leaders for this information, so that they can be responsible legislators for the future of their town.

FY09 Budget Process & Timetable

(This material is copied verbatim from a very informative page on the town's web site. It includes additional background on the Long Range Financial Planning subcommittees, and links to the budget analysis conducted by those groups last Summer and Fall)

At a tri-board meeting held on December 3rd, the Board of Selectmen, School Committee, and Finance Committee each agreed by formal vote on a process and timetable proposed by their Long Range Financial Planning sub-committees for developing budget balancing options for the Town of Andover’s FY2009 Budget, which will require some combination of cost savings, service/personnel cuts, an operating override, and fee increases.Specifically, the three boards:

1. Agreed on a $3 million target amount needed to balance the FY2009 budget through a combination of cost savings, service reductions and new revenues.
2. Agreed on the allocation of target amount reductions to departmental budgets based proportionately on FY2008 appropriations as a starting point, with the expectation that they will be adjusted later based on the severity of reductions for critical services.
3. Agreed on a target amount for a second round of departmental reductions equal to the FY2008 appropriations to provide opportunities for prioritization and tradeoffs.
4. Agreed on a timetable.
5. Agreed that the process will include fully exploring both override options and approaches to balancing the budget that includes a combination of overrides, fee increases and service cuts.
6. Clearly articulated what is expected from the Town Manager, Superintendent of Schools, and Department Heads.

Meeting reminder

The next meeting of the Andover Finance Committee will be held this coming Wednesday (16 Jan) at 7:00 pm in the 1st floor conference room (Community Development & Planning) in the Town Offices building.

The agenda includes the following topics:

• Appoval of minutes
• Transfer requests
• Sub-committe updates
• Discussion of Proposition 2 1/2 Override Options
• Finance Committee Report Warrant Article
• Budget Process / Meeting Schedule
• Other Business

Members of the public are also welcome and invited to attend and contribute!