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'When Do the Taxpayers Get a Break?'

City councilors argued Thursday for the city to use more of its reserve funds to reduce the increase on property taxes for next year.

The average homeowner in Peabody can expect a $94 increase in his or her annual tax bill.
The average homeowner in Peabody can expect a $94 increase in his or her annual tax bill.
The debate this year over taxes was unusual only insofar as how many councilors strongly objected to another increase for property owners.

"Why can't we just for once give the taxpayer a break?" asked Councilor-at-Large Dave Gravel. He argued the city was in healthy financial standing with the largest amount of cash reserves on hand in years, if ever, and many taxpayers are still trying to revive from the down market and economy.

Gravel said he couldn't support another tax increase ($94 this year) and instead asked Mayor Ted Bettencourt to use $4 million from reserves (free cash) to cover the total spending increase in Fiscal 2014.

The plan from Bettencourt and city finance officials, which was approved Thursday, was to reduce the burden on taxpayers by using $1.5 million from free cash, which was recently certified at just over $13 million.

Gravel also noted that if assessed home values do rise as expected over the next couple years, that will generate tax revenue in a much more palatable manner to taxpayers.

He said many homeowners are misled by the annual tax presentation because their homes are worth more than the average stated by city assessors. For example, the average single-family home was valued at $307,144 last year versus the average homeowner's property at $289,900.

Councilor-at-Large Anne Manning-Martin, who expressed similar concerns over the past couple budget cycles and tax hearings, agreed with Gravel Thursday night.

She said the city expects to save millions on employee health insurance, there are savings from consolidating some city jobs, increasing recycling to reduce tipping fees and some other measures.

"When we do these things, it's under the guise of saving taxpayers money, but every year we raise taxes. We save them money, but then raise their taxes," she said. "I wonder when we will be able to reward the very people that allow us to be in this position."

Ward 1 Councilor Barry Osborne likewise jumped in, asking for a concession from Bettencourt and what the "magic number" is on a sufficient level of reserve funds.

"Where's the line and when do we give a break to residents?" he asked, acknowledging the need to plan ahead for city projects and maintain a high bond rating, but also arguing that the city can give back a little more.

Osborne noted a lot of growth in his ward between residential and commercial developments, as well as many above-average home values. "There's going to come a time when we have to give back [to taxpayers]."

The city also continues to tax well below its levy limit -- $6.7 million below, in fact, which is referred to as excess levy capacity.

"There is a time to dip in further to the reserves, but I don't think this is the year to do it," Bettencourt replied. He said taking $4 million from reserves might feel good now, but only would delay the inevitable and no one would be smiling come budget season.

He argued the city would then be faced with laying off police officers, firefighters and teachers or asking residents to double up on a tax increase, or continuing an unsustainable cycle and draw from reserves again.

Finance Director Patti Schaffer explained that bond rating agencies consider whether a municipality has a plan to replenish its reserves after drawing down on them when bond ratings come up for review. High ratings mean low interest costs on borrowing for capital projects.

She said agencies also look at how a city intends to pay its long-term debt without relying on reserve funds.

Gravel responded that he understands the general principles and going from $13 million in free cash down to $1 million would yield a "junk bond rating," but down to $9 million didn't "seem so awful" to him.

Bettencourt said he made it a priority to build up reserves over the past two years because there is major spending coming due soon, such as the city's share of construction costs on the new regional vocational school in Danvers and the city's new middle school. In particular, he focused on the new voke.

"I'm still very concerned about the new vocational school and what that will cost the city," he said. "It's a wonderful school, state-of-the-art, but make no mistake about it, it's going to be very expensive."

The first construction payment was due this year at $200,000, but that only increases from here and Peabody's share of operational costs are still unknown. It depends on the city's final enrollment numbers at the school.

Given the current prediction for 162 students when the school opens next fall, that's $3.2 million in one year, based on projected expenses.

Bettencourt easily envisions a scenario where the city needs to draw on its reserves to pay the bill or continue to borrow money at a low interest rate, which is possible due to the city's high bond rating at AA1.

He added that he too believes current growth and revenue projections for 2014 should help alleviate the burden on homeowners.

Ward 6 Councilor Barry Sinewitz reiterated some of his own misgivings over Peabody's part in the megavoke, particularly over the unknown costs.

"When this council voted on the vocational school without knowing what the operational costs were, that was the most irresponsible thing to do," he said. "We're screwed. We got into this thing and we can't get out."

Ward 5 Councilor Dave Gamache said the city is "leaving money on the table" now in regard to landfill fees and other some areas, which he hopes city officials actively pursue negotiations on in the next year.

He talked at length about the ash monofill Covanta is operating on Farm Avenue -- it's the only one around and now that there's renewed activity at the site, Peabody should seek to get a "bigger bang for the buck."

Gamache said that could easily be another $500,000 or so in new revenues that could reduce future tax increases.

Ward 4 Councilor Bob Driscoll interjected that he sees a lot of good investments the city is making and in reality only asking taxpayers to pay another $7.84 a month.

Councilor-at-Large Mike Garabedian took it one step further -- he says it's just $1.80 a week and maybe $2 if your home is worth more than the average.

Ward 2 Councilor Arthur Athas pointed out Bettencourt pledged more reserves toward the tax rate this year than last and that it is a one-time funding source.

"I don't want to see taxpayers [taking] a $6 million to $7.5 million hit next year," he said.
 
Ultimately, the council voted 7-3 to transfer $1.5 million from reserves. Gravel, Manning-Martin and Ward 3 Councilor Rico Mello voted "no" while Garabedian, Driscoll, Athas, Sinewitz, Tom Gould and a reluctant looking Osborne voted "yes."

Councilor Jim Liacos was absent from the meeting due to a death in his family.

Osborne then made a motion to reconsider that vote, but it failed, 4-6, with just himself, Gravel, Manning-Martin and Sinewitz supporting it.

The council adopted the proposed classification factor, which yields a tax rate of $12.40 for residential and $24.46 for commercial, and that was approved on a similar 7-3 vote.
Russ December 14, 2013 at 08:20 PM
I have done a breakdown of Peabody "homeowner" based on the city's presentation. See my calculations for averages in the different groups below: Single Family tax Increase- $109.32 Condos tax Increase- $75.40 2 and 3 Family tax Increase- $18.64 Multi-Family (apartment complexes) tax DECREASE: $1265 On the state website page 60 of the following link shows the past 10 year stats for Peabody Single Family taxes. https://dlsgateway.dor.state.ma.us/DLSReports/DLSReportViewer.aspx?ReportName=AverageSingleFamilyTaxBill&ReportTitle=Average%20Single%20Family%20Tax%20Bills Last year's (FY2013) Peabody Single Family average tax was $3680. Average Single Family home value was $307,144. It is interesting; income-producing residential properties are actually contributing less to the city this year. Our homes are not income producing properties.... except for the city. For the city they are the cash cows! Income residential properties get the best tax treatment! They get treated as a business for assessment. Yet, they are taxed at the lower residential tax rate ($12.40) rather than the higher Commercial rate ($24.46)
Saber Walsh December 15, 2013 at 06:51 PM
When some of the more conservative voices in the "City Council" start to talk about spending our savings, we are utterly screwed. There isn't a (non-partisan) financial expert around today who isn't anticipating a "hard landing" of our economy soon that will eclipse anything we have seen before. Keeping taxes the same when we have a healthy savings account makes sense. But spending our savings to offer a "break" to those of us who are fueling the city's economy is just delaying the inevitable. Sadly, we will pay the price for electing very clever people into office who have sadly progressive views of the world, and are more than happy to spend our money until it runs out.
mark December 25, 2013 at 12:32 PM
The problem is they spend the tax money on special interest groups that elect them to office! Like teachers, police, firefighters, and all the other union thuggery, then the gays, minorities and idiots who graduate from liberal colleges. The country is doomed! We will resemble a 3rd world country soon unless you people stop electing fat Irish and Italian politicians on the local level! Look what they did in Malden, Everett and Revere! Selling out their own people for political gain!
Harold Sullivan December 27, 2013 at 02:58 PM
I'm just going to keep highlighting mark's comments until something is done about them. I won't even point out how awful/wrong they are, since I trust it's understood. But since they haven't been removed, I'm assuming that means Patch is okay with them? Weird. Let's quote from the Patch ToS: Without limitation, you agree that you will not post or transmit to other users anything that contains Content that: is defamatory, abusive, obscene, profane or offensive; is threatening, harassing or that promotes racism, bigotry, hatred or physical harm of any kind against any group or individual;promotes or encourages violence; is inaccurate, false or misleading in any way.
mark December 30, 2013 at 11:26 AM
Harold Sullivan doesn't even live in Massachusetts! He is a pinko left wing liberal who is trying to censor free speech!
Harold Sullivan December 30, 2013 at 12:36 PM
This is confusing. I do live in Massachusetts and have for all of my adult life. If I were a "pinko left wing liberal," wouldn't this be the top place for me to live, according to you? So which is it? Also, I got into the issue of free speech in the other story. I assume you've read up on it and now understand that free speech doesn't mean you have the right to say whatever you want, wherever you want? Or is this concept still confusing for you?

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