Friday, March 2, 2007
A look at the big financial picture
Town operating expenses that increase every year and two proposed large school building projects will have a large impact on property taxes over time, a new report shows. Though average household incomes are high, with the median income projected at around $164,000 in 2006, it remains to be seen whether residents can, or are willing to, absorb future tax increases.
After gathering data since last summer, the Special Committee for Long-Term Financial Planning has released a report that shows annual town operating expenses increasing at a steady rate: 3% for town departments, 5% for the Carlisle School, 6% for Concord-Carlisle High School, and 7 to 9% for personnel benefits that include health insurance and retirement expenses for all town employees. However, by cutting back the growth of expenses that can be controlled, the report says, the tax impact can be reduced over time. "If budgets can be moderated by 1% in each category (2% town, 4% Carlisle School, 5% CCHS) we could have a significant impact."
The report, presented by Selectman Tim Hult who chaired the special committee, at the Selectmen's meeting on February 13, is a first attempt at a long-term financial model to project town income and expenses for the next 20 years or so in order to assess the impact of increased taxes on residents.
The report looked at future expense growth, income from state aid and local receipts, and income and demographics data as the basis for projections. While the committee projected a financial picture of operating expenses and the school projects, Hult said they didn't evaluate whether the school projects were good or bad.
Two major school building projects will have a long-term financial impact on town debt and taxes. The Carlisle Public School is planning a new building projected to cost close to $30 million, while Concord-Carlisle Regional High School is planning to build an entirely new school at a cost estimated at around $90 million. Though state reimbursement for the projects is expected to be around 40%, the report suggests the financial implications of the school projects need to be strategically managed by the Selectmen.
The School Building Committee recently spoke with Selectmen about a possible Warrant Article for the Spring Town Meeting for approximately $3 million in design funds for a new elementary school building. Plans are to demolish the Spalding Building, rated in the poorest condition by the state, and replace it with a new elementary school building connecting to the existing buildings. The new building, 45,000 to 65,000 square feet in size depending on the building's final design, will be considerably larger than Spalding's 16,000 square feet to address the school's long-term classroom needs.
After a 40% reimbursement expected from the state, Carlisle's costs for the $30 million project are projected to be around $18 million.
Concord-Carlisle High School's buildings are also rated in the worst condition by the state. Last year the high school feasibility study group recommended building a brand-new high school at a cost estimated then at around $90 million. The group recommended a complete building replacement rather than spending nearly the same amount of money to make extensive renovations on existing buildings.
After a 40% reimbursement expected from the state, Carlisle's share of a new high school, about one-third of the remaining cost, based on Carlisle's enrollment, is projected to be around $17 to $18 million.
Hult showed a chart projecting tax incidence, the percent of household income that is spent on local taxes. With the median household income projected at $164,325, and the property tax on the average home now at $9,754, the tax incidence rate is calculated to be 5.9% of income.
Annual increases in town operating budgets, the report says, will increase the percentage of income going to local taxes to more than 7% within ten years, even without the new school buildings. With the current rate of operating expense growth, by 2015 the average tax bill could rise to around $14,500, according to projections.
With the addition of the two school building projects, the average tax bill could rise by another $3,500 by 2015. However, Hult cautioned, though the tax increases look steep, household incomes will also rise over the period at a rate the town projects at 2.5% a year.
The tax load, while tolerable to some residents, could affect others more. Some homeowners may see the value of their home rise greatly over the years, but they may have a reduced income due to retirement, said Hult, pointing out that a steep rise in taxes could have a greater impact on these households.
With minimal commercial base for taxes, Carlisle must depend on household property taxes for the bulk of its income.
The report looked at reducing operating expenses in town budgets by 1% as a way to moderate the effect on taxes. Beyond operating expenses, the report also suggests prioritizing the school projects.
While the FinCom attempts to moderate town operating budgets and Selectmen may set priorities for the school building projects, ultimately voters will decide whether to accept or reject tax increases at Town Meetings and at the polls. Of the school projects, Hult said voters will have to evaluate them by asking, "Am I willing to increase [tax] expenses to get this done?"
At the request of Selectmen, the Carlisle School Building Committee recently looked again at the possibility of adding pre-fabricated modular classrooms to the school, as a lower-cost alternative to constructing a new building. Though modulars could add new classroom space to the school in a short time, the school has a good building design from last year's Master Plan, said Chair Christy Barbee.
The Building Committee has emphasized that construction costs continue to escalate and the longer the town delays the building project, the higher the cost to the town. "Construction cost escalation is enormously important," Hult agreed. Even with this problem, the Long-Term Financial Planning Committee's report suggests, "Effort should be made to affect the size and timing of large expenditures and secure maximum possible reimbursements."
The Long-Term Financial Planning Committee included representatives from town boards including Hult from the Selectmen, Town Finance Director Larry Barton, FinCom members Barbara Bjornson and Sue Wolf, Planning Board member Brian Larson, School Building Committee Chair Christy Barbee, Regional School Committee representative Michael Fitzgerald, Long-term Capital Requirements Committee member Don Rober, and Member-at-Large Fontaine Richardson.
Hult credited former FinCom member John Nock for his previous work on the financial basis of the model, and Larry Barton who helped compile financial information for the next two decades. Former Selectman John Ballantine also contributed to future income projections and the concept of tax incidence.
The report is expected to be updated annually by Barton and the Selectmen. There may be a future meeting to gather public comments on the topic and a short presentation at Town Meeting in May. A copy of the report is available at the Gleason Public Library and at the Town Finance Director's office at Town Hall.
© 2007 The