Fiscal sustainability: Some modest proposals

By Bob Rakoff

The Town of Amherst is not fiscally sustainable without significant changes. The major problem is that nearly 50 percent of the land in town is exempt from property taxes, which account for 70 percent of the Town’s annual revenues. State aid makes up another 20 percent, while 10 percent comes from other sources.

The Town has limited control over these sources of revenue. The state makes its own decisions about local assistance. And the ability of the town to increase property tax revenue is constrained by law, by the regional real estate market, by a limited supply of buildable land that is appropriately zoned for development, and, of course, by the unpopularity of tax increases.

At the same time, demand for public services continues to increase beyond the growth of our tax base; we already face one of the highest property tax rates in the state. Deferred capital projects (library, school, fire, public works) pose significant financing challenges, even in an era of low interest rates. Voter approval of a tax override in 2022 to finance a new elementary school is by no means assured.

In response to this tension between the supply of tax revenue and the demand for expanded and quality services, there have been two kinds of responses.

Some people call for retrenchment, with deferral or scaling back of some capital projects along with cutbacks in regular annual spending. Others see more intensive commercial and apartment development as the route to a more sustainable and affordable future that does not sacrifice needed building projects or popular programs.

Retrenchment is not politically popular, and its proponents are also largely opposed to increased apartment development. Meanwhile, proponents of expanding apartment construction to increase tax revenue acknowledge that such development may make expansion of town-financed services (e.g., schools, library, public safety) even more necessary. Of course, if apartment development attracts mostly households without children, then the impact on school spending is lessened. But that would mean more apartments for college students, not working families, hardly the best or most equitable future for our diverse town.

There seem to be no easy answers. We need new revenue sources. And we need new, outside-the-box thinking.

So, in the spirit of Jonathan Swift, here are a few modest proposals for a more sustainable fiscal future for Amherst.

NULLIFICATION. Texas has taken the lead in declaring that it has the right and power to nullify federal laws it dislikes. Let the Lone Star State be our guide here. The Town should declare as oppressive the state and federal laws that prevent the taxation of property owned by non-profit organizations and move expeditiously to tax the holdings of Amherst College, Hampshire College, and other rich, tax-exempt landowners.

UMASS STUDENTS. There is not much we can do to get more money out of UMass. But UMass students are another story. Those students spend millions of dollars to purchase credit hours. Those credit hours are a commodity that is ripe for taxation. Let’s go after them.

Photo by Adi Coco on Unsplash

GAMBLING. Instead of pursuing boring and expensive capital projects that will never return real profits to the town, we should pursue the more lucrative path of casino development. Perhaps go for double-or-nothing by locating a casino on the capped landfill.

NAMING RIGHTS. We already have a library named for the benefactor, Samuel Minot Jones. Let’s sell the naming rights for other buildings and spaces. Imagine a Jeff Bezos Elementary School, or a Warren Buffet Public Works edifice. Or imagine buying your local fruit and veg on the Apple Computer/Steve Jobs Memorial Town Common.


ANNEXATION. As one local wag put it (OK, it was our own Nick Grabbe), the Town of Amherst has outsourced its commercial development to the Town of Hadley, which reaps the benefits of an expanded tax base, increased revenue, and low tax rates for homeowners. We need to take control of that development and seize those tax benefits. The town should raise a militia (perhaps ROTC at the University could assist), march directly down the hill, and forcibly annex the Town of Hadley. This would add substantially to our commercial tax base while providing us with valuable agricultural and waterfront property. The likelihood that there are more gun owners in Hadley than in Amherst should not deter us. Be of stout heart.

Pretty wacky, I know. But both fantasy and reality require outside assistance to move toward fiscal sustainability. The state grants the town new taxing authority. A rich benefactor comes to town. Neighboring towns join forces to work together on common problems.

It’s this last case that points the way to a new path. Not through conquest, but through regional cooperation. The accident of having a big state institution or less valuable property should not determine a town’s ability to offer and pay for public services. Equity and efficiency demand a shared, regional approach to governance. And for Amherst that means re-creating Hampshire County government. What that would entail, and promise, will be the subject of a future article.

Can we afford four building projects? Yes! Here’s how

By Sarah Marshall

What is the Town’s plan for paying for the Jones Library expansion and renovation, a new or renovated elementary school, a new fire station, and a new DPW facility, all to be constructed over the next 10 years? Are we in for huge increases in our property tax bills? How can Amherst afford this infrastructure push? [Answers: Read on, No, and Read on.]

If you are nervous about undertaking so many significant projects, and worried about the Town Council’s appropriation of $35.3 million for just the Jones Library, or if you wonder whether we can build a school if we pursue the library expansion, please read to the end, because you should have a clear understanding of the ballot question you will see on Nov. 2.

First, a quick explanation of the Council’s April 2021 vote to appropriate $35.3 million for the Jones Library renovation and expansion project, which we will be asked to affirm on Nov. 2.  Much erroneous information has circulated about that vote, so it is time to set the record straight. Council’s “appropriation” amounts to authorization for the Town to borrow up to that amount of money. The “appropriation and borrowing authorization” language is standard for large construction projects – Town Meeting voted on such matters in the past. In addition, appropriated money is not limited to tax revenue but can include grants, donations, and other funds.

But why would the Town need to borrow $35.3 million, when the ultimate cost to Amherst will be $15.8 million?  First, Amherst will probably not borrow that much, but the Massachusetts Board of Library Commissioners (MBLC), which has granted almost $14 million to the project, asked Town Council to authorize borrowing for the total project cost. Second, because some funding may arrive after the bills are paid (for example, private donations and receipts from the sale of historic tax credits), the Town may need to borrow some money for which it will later be reimbursed. The Town will not be on the hook for a $35.3 million library project. Here is the table showing who will pay what, in the end:

Appropriation & Borrowing Authorization Order FY21-06C

  • MBLC Grant Contribution $13,871,314
  • Jones Library Inc. Trustees $ 5,656,576
  • Town’s share $15,751,810
  • Total $35,279,700

It is this set of numbers that you will see on the ballot.

But what about the Town’s share, $15.8 million? How will that be paid for? Will it prevent us from undertaking other projects?

Here it is useful to have a basic understanding of the plan developed by the Town’s Finance Department and presented to the Finance Committee and Council in February 2021. Town Council requested that Town staff develop a plan for financing all four major projects in a timely fashion, specifically to learn whether it is feasible for us to undertake them all in a way that voters are likely to support.

The ensuing financing plan (which indeed makes many assumptions) shows that the Town can afford to build the four projects without severely constraining our public services or ability to fund smaller capital projects such as sidewalk repairs and snowplow purchases, or by unreasonably burdening taxpayers. Basically, the plan is to borrow funds for three of the projects (Jones Library, Fire/EMS station, and a DPW facility) and to pay off the debt over time from our existing revenue streams, including grants and donations; only for a school project will taxes be raised for a limited time. We may have a couple of years of tight budgets, to be sure, as the projects begin, but several factors will work in our favor:

  • Low interest rates for loans overall,
  • The Town’s strong bond rating and financial record, which let us borrow at advantageous rates,
  • The Town’s strong cash reserves (i.e., savings), which can ease some of the early spikes in debt payments and, if necessary, contribute towards annual operating budgets,
  • Very low levels of Town debt currently, which will be entirely paid off within a few years,
  • Continued new growth in taxable real estate, which raises annual revenue and spreads excluded debt over more taxpayers,
  • Imposition of cost caps on each project, so that we know in advance what our total payments of principal will be,
  • Disciplined policy of directing a portion of property tax revenue to capital expenditures,
  • Conservative annual budgeting, which means that the Town typically has cash on hand at the end of the fiscal year that can be placed in reserve.

For a new elementary school, the financing plan envisions a debt exclusion override for the Town’s contribution (approximately half of the total cost will be contributed by the Massachusetts School Building Authority). This type of override raises property taxes only for the period while the debt is paid off; it does not permanently raise property taxes. Why an override for the school borrowing? Because voters approved an override for an elementary school project in 2016, and a majority of voters (but not the required 2/3) again supported the override after Town Meeting would not agree to the necessary borrowing, planners feel they are likely to support an override in the next year or so.

Delaying projects any further is likely to cost us more in the end, or give us less for the same price. The Finance Director, Sean Mangano, noted that an elementary school project, when it finally begins, will cost us substantially more than the project that was rejected several years ago. He also noted that continued delays require us to spend large sums on repairs to buildings that are at the end of their useful lives. The Town also should get the present projects completed and paid off before other parts of its infrastructure need to be significantly renovated or rebuilt several decades from now.

From a fiscal standpoint alone then, prudence demands that we voters stop arguing over design details, agree to compromise, and step up to our civic responsibility to maintain our public infrastructure, parts of which have deteriorated to dangerous and shameful degree. We need to say “Yes” on Nov. 2 to affirm Council’s vote to proceed with the Jones Library project and “Yes” in a year or so when a debt exclusion for the elementary school is put on the ballot. Financially, there is no better time to undertake this work.

[Note: You can find more information about the plan by clicking on the “Overview of the Four Major Capital Projects” page on the “Town Government 101” drop-down menu on this website.]

So Many Budgets!

By Sarah Marshall

In my family, we have only one budget that accounts for all the money that comes in and goes out, and we have (almost) complete control of it.  I think that Amherst residents tend to assume that Amherst’s public budget is similar – there is one big pot of money and we have complete freedom to decide how to spend the funds. Certainly, this was my hazy assumption for many years. But it is not entirely true. If you have ever wished the Town spent its (our) money differently, it is worth reading on so you will know when and how to voice your opinion most effectively.

Amherst has, in effect, several budgets and funds.  Crucially, much of the money cannot be moved from one use to another during the fiscal year.  We have the Regional Schools budget, the Jones Library budget (which addresses all the Town’s public libraries), the Elementary Schools budget, the Community Preservation Act (CPA) fund, Enterprise funds (water, sewer, solid waste, and transportation), the Town (Municipal) budget, and a few others.  Adding to the confusion is imprecision in the term “Town Budget” – to some, it may refer to all aspects of spending on public services, while to others, it may refer to specific chunks of that spending that are within the control of the Town Manager.

Our local officials and managers make critical decisions early in the planning cycle, namely, what are the bottom-line contributions the Town proposes to make to the Regional and Elementary Schools and the Libraries.  It is at this point – generally in November – that significant shifts can be made instead of across-the-board increases or decreases. Once the elected leaders of those bodies – the school committees, for example – develop and pass their budgets, and they are subsequently passed by the Town Council, only those bodies have authority over their money.  The Town cannot take money out of the Elementary Schools budget during the fiscal year to buy new computers for the Department of Public Works, for example.

Amherst’s contribution to the Regional School budget (which funds the Middle and High Schools) depends heavily on the decisions made by Pelham, Leverett, and Shutesbury, Amherst’s regional partners. Once Amherst votes its contribution, the Town has essentially no power to claw back money from the Regional Schools to use for, say, affordable housing. Similarly, the schools cannot reach into municipal funds.

The Enterprise funds represent the self-funded water, sewer, solid waste, and transportation operations. Even though they appear in the Municipal budget, these Town services are required to charge fees sufficient to cover their costs, and Enterprise funds cannot be raided to fund unrelated activities of the Town. Our water and sewer bills reflect the cost of those services.

The CPA fund receives a property tax surcharge, as well as some funding from the Commonwealth, that by law can only be spent on certain projects pertaining to historic preservation, community housing, recreation, and open space.  I recently heard someone complain that the Town was choosing to spend on the order of a million dollars on a renovation of the North Common and should instead fund the new Community Responder program.  Such a re-allocation is not possible, since the North Common renovation will be paid for almost entirely by CPA money that cannot be spent on town services.  In fact, the ability to apply CPA funds to the needs of Town buildings and properties frees money for services such as the Community Responder program, or at least avoids pitting these needs against each other.

During any fiscal year, the Town Manager has the authority to re-allocate funds within the Municipal budget, understood here to exclude all the operations and expenses discussed above.  For FY2022 (which began this July), that budget amounts to $25 million, out of the approximately $96 million that also includes the budgets for the schools, libraries, Enterprise funds, capital investments, and some other uses.

The relatively small fraction of total spending spent on municipal services managed by Town Hall can lead to problems of interpretation.  For example, I have heard people express dismay at the fact that our Public Safety Department accounts for 44% of the General Fund (the Municipal budget). That certainly seems disturbingly large if one assumes that public safety is simply police services.  In fact, comparable funds are spent on the Police and Fire Departments, the two major Public Safety services.  Furthermore, in comparison to our total public expenditures, Public Safety services account for just 12% of spending, with about 6% allotted to the Police Department.  Since our property tax payments and water and sewer bills contribute to all Town services, from police to schools to libraries to capital improvements, I think the latter comparisons are more informative.  Whether 6% is an appropriate level of funding for the Police Department is another matter.

Image by Steve Buissinne from Pixabay

So, no, Amherst’s public budget does not allow nearly as much flexibility as my household enjoys. We can set our own rules and priorities and change them as we see fit but the Town is much more constrained.  Residents who want changes in the Town’s spending priorities need to figure out which elected body to speak to, and when.  Fortunately, in the fall, a budget calendar will be released, outlining the steps, responsibilities, votes, and opportunities for public input.  Anyone wanting to learn more about where our Town’s money comes from and where it goes can jump into the resources at https://www.amherstma.gov/78/Budget.  The calendar will also be posted there.  Residents can also email their Town Councilors, School Committees, Town Manager, and library Trustees at any time.