Selectman Pushes Plan To Address Budget Shortfall

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By: Mary Stanley
Published: 10/01/10

Selectman James W. Pierce is getting creative with finding solutions to address the town’s financial woes.
Last month, after Town Manager George H. Dunham finished his pitch to selectmen for a Proposition 2 1/2 override, Mr. Pierce made his own proposal to close the gap between expenses and revenues in the municipal budget.

The town is facing a $2.2 million shortage in next year’s budget. Mr. Dunham’s plan is to present an override to voters next May. In November, voters will be asked to approve a $5.4 million debt exclusion, which is a temporary tax increase, to make long overdue repairs to several buildings in town.

To reduce the financial burden that a debt exclusion would place on taxpayers, Mr. Pierce proposes reducing the Community Preservation Act surcharge that property owners pay to offset the additional tax created by the debt exclusion. Currently, the CPA is a 3 percent surcharge attached to each property owner’s tax bill. Mr. Pierce estimated that by reducing the CPA surcharge to 2 percent, it would save taxpayers $460,000 a year.

“If we don’t take $460,000 a year from taxpayers for the CPA, but then turn around and take it for the debt exclusion, taxpayers break even,” Mr. Pierce said.

“It’s a shift in priorities from community preservation to infrastructure renovation. I’m sure no one 10 years ago thought we were going to do community preservation instead of capital reinvestment. It’s only with 20/20 hindsight that we can see that is what we’ve done,” Mr. Pierce said.

Jonathan D. Shaw, a member of the committee that oversees the town’s CPA money, opposes the plan.
“It’s penny-wise and pound-foolish,” he said. He pointed out that a reduction in the CPA surcharge would also mean a reduction in the matching contribution that the state makes.

He went on to say that the town has benefited greatly from the CPA funds raised and there have been a number of projects related to historical preservation, recreation, affordable housing, and land purchases that were completed with the help of the money from this account.

Mr. Pierce’s fellow board members also expressed concern with the proposal.

Chairman of the board of selectmen Dana P. Barrette pointed out that voters could approve reducing the CPA surcharge, but then vote down the debt exclusion.

Mr. Pierce acknowledged the risk with this proposal.

“There always is the possibility that taxpayers could say, ‘Thank you very much for the tax break on the CPA’ and then turn around and vote no on the debt exclusion,” Mr. Pierce said.

As for the projected $2.2 million deficit next year, Mr. Pierce said implementing a pay-as-you-throw program could help free up some of the tax revenues that are currently funding the operation of the transfer station.

As it stands now, the cost to operate the transfer station and haul away the trash is $1.5 million a year. Revenues from dump stickers cover half of that cost while the remaining $750,000 comes from property tax revenues.

Mr. Pierce said if the town adopts the pay-as-you-throw program and sets the fee for the specially made trash bags at $1.50 but leaves the cost of a transfer station sticker set at $110 per year, it could generate an additional $400,000.

If a family can reduce their solid waste generation to just one bag a week, Mr. Pierce said, “they should be able to get away with spending a total of $188 per year for trash disposal.”

“Right now, we are spending three quarters of a million to subsidize the transfer station,” he said.
He said if that subsidy could be reduced by $400,000 from the sale of bags, that is money that could be used for police or fire, rather than solid waste.

“There is no denying that it is a tax. We are just asking people who use the service to pay for the service,” he said.

Although it would be much simpler to double the cost of a dump sticker from $110 to $220 per year to completely cover the cost of operating the transfer station, he said that does nothing to encourage recycling and reduce the amount of solid waste that the town pays to dump at SEMASS, a waste-to-energy trash incineration plant in Rochester. And with the SEMASS bill expected to triple from $37 a ton to $110 per ton by 2015, Mr. Pierce said the pay-as-you-throw program could help save taxpayers big money five years from now.

He said if the town relies on the dump sticker fees to completely cover the cost of trash disposal and does nothing to encourage recycling, by 2015, the cost of a dump sticker could be as high as $440 per year.

Another opportunity to generate money for the town, Mr. Pierce said, is to overturn the almost $500,000 Proposition 2 1/2 “underride” that was voted in 2005. That underride came after the state increased its local contribution to the town.

Mr. Pierce said the town has missed out on collecting that $500,000 and by Fiscal Year 2012, which begins on July 1, 2011, that equals $3 million in revenues lost.

“We gave back $3 million instead of taxing the residents. We are now facing a deficit with no money in the bank. I’m not saying that if we never passed the underride, we would now have all of that $3 million in the bank. But given the town’s history with putting money into the stabilization account, some of that $3 million would have found its way there,” he said.

He said overturning the underride would cost the average taxpayers an additional $45 a year.

Mr. Pierce has also proposed implementing an optional meals tax for Sandwich. Earlier this year, the state gave municipalities the option to implement a local tax on meals and lodging to offset reductions in state aid.

Mr. Pierce said if the town approved increasing the meals tax by just three quarters of a percent it could generate as much as $137,000 in additional revenues. Mr. Pierce, however, estimated this week in a phone conversation that additional revenues from this tax may be closer to $100,000.

He said on a $20 meal, this tax would equate to an additional 15 cents. A meal that costs $100, he said would cost an additional 75 cents.

Mr. Pierce presented his four proposals to the Sandwich Chamber of Commerce’s issues and alliance committee last week.

“Generally, our members support looking at different ideas for generating more revenues. They seem to like the pay-as-you-throw program because it promotes and encourages recycling, which could contain costs,” said chamber Director Kathleen M. Bavelock.

However, members of the restaurant industry were not entirely impressed with the proposal to implement the local option meals tax.

“A couple of years ago, we put out a statement opposing any new taxes and we continue to oppose them. Taxes by their very nature impact consumer spending. The restaurant industry in particular has been hard hit in the recession. It’s an equity issue and it is unfair to tax one sector,” said Ms. Bavelock.

“In an economy like this, when you’re in a recession, I don’t know any economist that would recommend raising taxes,” said Debra M. Davies, owner of The Bee-Hive Tavern on Route 6A.

Ms. Davies pointed out that the restaurant industry was already hit with an additional tax earlier this year when the state increased the meals tax from 5 percent to 6.25 percent.

“I am not an advocate of targeting one industry. They say we shouldn’t take these things personally, but it’s hard not to when it targets one industry,” she said.

Ms. Bavelock pointed out that an increase in the meals tax could result in lower tips for servers. “Studies show that tips decrease when taxes increase,” she said.

“It’s not worth the revenue that would be generated to dampen consumer spending,” Ms. Bavelock said.
Mr. Pierce acknowledged the chamber members’ opposition to this particular piece of his proposal. “I didn’t expect to change their minds,” he said.

Mr. Pierce said overturning the underride, implementing the pay-as-you-throw program and the local option meals tax could generate close to $1.1 million annually for the town.

“It would not completely avoid an override next year, but it would certainly lighten it,” he said.

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