Bigger pie, or smaller appetite?

By Sarah Marshall

Amherst voters have a big appetite. We  want:

  • open space with trails and amenities
  • excellent schools
  • lively business districts
  • more housing at a variety of income levels
  • a community responder program in conjunction with a reduced police department
  • the traditional look and feel of our village centers
  • updated/rebuilt/renovated public buildings
  • diversity and outreach programs
  • more and/or easier parking
  • an expanded public art program
  • wide sidewalks
  • an economic development director
  • updated and well maintained parks
  • updated and well maintained recreational and athletic facilities
  • capital investments to mitigate climate change
  • a robust reparations program
  • efficient delivery of public services
  • well paid public employees
  • roads in good condition
  • prompt responses from emergency services
  • . . . .

The Amherst money pie is not large enough to satisfy all these wants, reasonable as they may be.

Last winter and spring, as the pandemic began to ease, the Town began to form its annual budgets for town operations, the regional schools, capital expenses, and other functions for the fiscal year now in progress. The pandemic devastated several of the town’s income streams, such as from hotel and restaurant taxes, parking receipts, excise fees, and growth in new taxable properties (that is, from new construction). In addition, anticipated contributions from the state to the schools and directly to the Town decreased. The budget decisions for the fiscal year that began July 1, 2021 (FY22) were extremely painful. The regional schools budget was forced to cut teachers and services. The elementary schools were forced to give up some art and music teachers. All town departments were held to 2.1% increases to their budgets.

We need a bigger pie.

I listened to searing public comments at School Committee and Town Council budget hearings, begging for money to be moved to the schools, or moved to a new community responder program, or to preserve other services.  Now, as Town Hall and Town Council begin developing next year’s budget, similar public comments are being offered, and the Town is likely to propose even more funds for community responders, perhaps additional funds for a reparations program, for a BIPOC youth center, for climate sustainability projects, and more.

Where will the money come from?

A couple of months ago, I listened to the presentation of financial indicators for the next fiscal year, and while some of the news is good (meals and hotel/motel taxes are recovering, for example), other news is not (essentially flat state aid, rising health insurance costs). Painful decisions await the Town Council that will take office on January 3.

We will be fortunate to have almost $12 million in ARPA funds to spend on many aspects of our budgets, including some new endeavors. But in a few years, either these efforts will end when the ARPA funds run out, or we will need to shoehorn them into ongoing operating budgets.  Without enlarging our annual revenue streams, projects, departments, wants, and needs will be pitted against each other in a zero-sum contest.

The revenue stream over which Amherst has the most control is property taxes, which can be increased by promoting, or at least allowing, new construction – of houses, apartments, commercial buildings, and accessory dwelling units.  Every new construction increases the value of the property it sits on, and therefore the property taxes paid by the owner for years to come. Other options for increasing our revenue include a Proposition 2-1/2 tax override, which permanently increases our tax rate, or selling off open space for development.  If we don’t increase our revenues, we will need to decrease our expenses, and cross some items off the list above.

Councilors are responsible for setting the budget priorities for the Town Manager to follow as staff work out the details. Town Council needs to decide which of our wants are top priorities and which to eliminate or postpone. However, Council can also take a lead role in driving policy that increases our revenues, primarily by promoting – not just not discouraging – new construction and business development.

Of course, another option – especially if residents oppose new development – is to go a little bit hungry, that is, reduce programs, services, personnel, benefits, asset purchases, and the like. But I rarely hear any proposals to cut specific programs or services with the aim of reducing our total expenditures.

What do you suggest? I am truly interested in your thoughts.

9 thoughts on “Bigger pie, or smaller appetite?”

  1. Really nice to see the entire shopping list, and the challenge to prioritize what’s most important to fund.

    “We want,” in the title, implies agreement on the listed desires; however, I am certain that some have broader and/or more well-substantiated support, and others may appeal more as ‘nice ideas.’ At least a few on the wish list would be roundly dismissed – as they should – in a proper referendum… at least at this time.

    More crucial and practical than arguing the merits of individual items is the reality that Amherst’s tax and spend model is not sustainable. Eyes too big for stomach, and for wallet. And I think financial sustainability is a principle around which a majority of AC readers, and town citizens, can agree. Growing income is job 1.

    Tom Porter

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  2. Is there not some way to both encourage new development but also increase taxation on rental properties? Given what I think has been a massive increase in the number of rental properties in town over past few decades, it seems like landlords/property owners/developers are seeing the rental market as quite lucrative. Is there an accepted way to have landlords pay a higher tax rate than in owner-occupied houses? Seems like there must be some sensible middle ground where you’re not taxing to the point of discouraging new development, but also using this new “industry” in town to generate more revenue, without putting more burden on families in town. Although I guess higher taxes would just translate to higher rents? Maybe not if there was an increase in supply of housing though? I’m no economist. (Full disclosure, my wife and I own a rental property in town: a separate rental unit on the parcel with the house we live in. To my knowledge, we just pay an extra $100/year as a “premium” for being landlords.)

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  3. Great article and great comments.

    I think it is helpful to differentiate between the strengths of our two educational anchors. UMass has the potential to spin off many great companies and innovations, while Amherst College has the potential to invest in them because of the size of it’s endowment and affluence of its alumni and parent bodies.

    Those are not their only strengths obviously, but it might be helpful in shaping long-term partnerships.

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  4. What is involved in getting UMass and Amherst College (I elide Hampshire College due to their small stature) to contribute their fair share to the town? While they do pay some amount of money (“in lieu of” property taxes), I imagine it is far less than they’d pay under a fair system where they pay a similar property tax to the rest of us, given how much land they use. Do their taxes go up every year along with everyone else’s?

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    1. Andrew, this is a great question to pursue with your Town Councilors. Several years ago, Larry Shaffer pushed both AC and UMass to commit to a PILOT, which they had never done before. I don’t know if the amount agreed to back then is supposed to go up every year as it should or if a new contract needs to be written with them. And it’s still a small amount compared to what they would pay if they paid the same property taxes everyone else pays. Larry structured it to pay for emergency services. It would seem that it should go up every year since our ES budget goes up every year. State law exempts them from property taxes which is why towns/cities crate PILOT contracts. Both institutions pay the going rate for water and sewer.

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      1. It’s possible the payments are not labeled PILOT’s but are part of an MOU with each institution. I believe that’s how it works with Smith College and Northampton. My memory is that both Smith and AC emphatically rejected the idea of PILOT and wanted the payments known as contributions and/or gifts.

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  5. There is evidence that creative partnerships between the state and local gov’t to center investments in innovation and entrepreneurship in rural college towns like ours will be the long-term solution to economic health and vibrancy. Despite many good efforts made over the years, the promise of the higher ed ecosystem locally has not yet been achieved. There is still a great opportunity here to encourage strategic innovation cluster development. The University must leverage its lobbying power to trigger the right type of policy and gov’t investments in building the startup pipeline here in the western part of the state. Those playbooks have been written so we would not have to start from scratch. There needs to be some muscle in tech and IP transfer from the university, as well. Access to capital is one of the biggest needs in under-invested regions like ours. The availability of funds to match SBIR grants, for example, could be an area to focus on.

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  6. Solar not only will be an important move to get our planet off dirty power, but it will bring in perhaps $70k in PILOT money, which has close to zero associated costs that other development has for emergency services, roads , schools. Seniors, etc.

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  7. Sarah, you wisely elucidate our town’s financial challenges.

    Although cutting expenses is more difficult than raising revenues, we could consider eliminating some costs by selectively reducing staff positions. I do not have any specifics to offer, but I have a strong feeling that a review of town employment would find more than one or two jobs that could either be done by citizen volunteers or are basically unnecessary because there are other staff who perform the same functions.

    On the revenue side there are more opportunities. Solar farms are not only good for the global environment, they bring in revenue. Amherst has continually missed chances to build them. Now would be a good time to change that. Another potential revenue source is to encourage large, non-polluting private industry. Whether it be large greenhouse projects (e.g., cannabis), distribution warehouses, or some other business that could take advantage of proximity to Routes 9 and/or 116, we should recognize that limiting economic development to downtown and the south and north business centers may be shortsighted given the amount of open space available for development outside of those areas. Another potential revenue increase is to negotiate higher contributions from the colleges and university.

    I agree we need to start considering these and any other alternatives to raising property taxes and Prop 2 1/2 overrides.

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