Tax Demagoguery

I am back from a Christmas respite from blogging. I hope you all had a wonderful holiday season. As you likely know the Methuen City Council is faced with a vote on tax classification, which has brought forward a torrent of misinformation and a fair share of demagoguery and political theatre. Lets look at the facts and try to set the record straight.

Two weeks ago the City Council, by a 7-1 vote, approved a classification factor of 170. That factor would have led to an average residential tax increase of $88.04. It would have raised approximately $62,030,425 through the tax levy. The classification factor of 170 was rejected by the Massachusetts Department of Revenue, and consequently the City Council was faced with the task of passing a factor that could be approved by D.O.R. The maximum factor they would allow is 164, which would lead to an average increase for a residential homeowner of $128.18, and also decrease the commercial burden from $609.92 to $287.32. It is important to note that the factor being set at 164 raises $62,030,425 through the tax levy. That is the same amount raised with the factor set at 170. So the City Council voted to raise $62,030,425 from the tax levy two weeks ago, and now we have some members calling for a tea party because they are being asked to raise the exact same amount, $62,030,425. Interesting. We also heard from some that the City could effectively ignore the Department of Revenue and send bills based on the factor approved originally at 170 by the City Council. Nothing could be further from the truth, and even a rudimentary knowledge of municipal finance would prevent one from making such a claim.

The setting of the tax classification factor has also set off further misunderstandings about the budget process, and about the impacts of non-action by the City Council. Before the adoption of the municipal budget the City of Methuen entered into contracts with our nine unions that provided an unprecedented level of givebacks by those unions. All nine city side unions, in order to avoid layoffs and service cuts, agreed to give back ten percent of their wage base through these contracts. Municipal managers also took ten percent wage cuts. These cuts totaled close to $2 million dollars. Municipal unions, including the Teachers Union, agreed to changes in the design of our health care plan that saved taxpayers $1.2 million dollars in this fiscal cycle. In return the City agreed to a no layoff policy for this fiscal year. All nine contracts were approved by the City Council. These contracts forestalled the layoffs of twenty police officers and twenty firefighters, as well as scores of City Hall workers and DPW employees. As Mayor I have not filled positions in this budget that had a wage value of over one million dollars, including the Deputy Chief of Police, the Assistant to the Fire Chief, two DPW Superintendents, one Police Captain, six DPW workers, and the Historic Planner. The Land Use Planner for the City has been cut to a 24 hour per week position. We have actually reduced the size of city government, and done so in a significant way. The operating budget of City Government has been reduced in this cycle by approximately $2.5 million dollars. Our problems lay in explosive increases in fixed costs, and a massive reduction in state aid.

Facts and details can be bothersome things, and the call by some to “furlough” employees to further reduce city expenses shows a shocking lack of knowledge about contracts that bind the City, and the devastating consequences the City would face if those contracts were violated. If the City Council does not act to set a tax factor the City of Methuen would likely be faced with a cash flow problem by the end of January that could be as high as $14 million dollars. Contrary to the Tribune editorial this is not a budget “shortfall” but rather a problem of tax collections being pushed further into the future, leaving the City unable to meet payroll or honor its other obligations. Under those conditions I have said that I would have to consider furloughing employees, not to solve a budget problem but rather because the City would not be able to fund payroll. Such an action could be construed as a violation of our one year labor agreements and subject the City to having to repay the ten percent given back by our employees, or $1.9 million dollars. The additional suggestion, that employees be furloughed to reduce City expenses, would be a clear violation of those agreements, since we have furloughed ten percent of their wage base already. That tea would be very bitter and expensive for the taxpayers of Methuen.

Any increase in property tax is a real burden to all, especially in difficult times. As at budget time I stand ready to work in a positive way with the City Council. If some members feel that midyear budget cuts are in order I await their specific suggestions as to which departments and line items should be cut. Our budget protected the Nevins Library, services to our seniors and veterans, and ensured our public safety sector’s ability to deliver vital services to our citizens. We have delivered a budget that is balanced, and we remain over a million dollars below the Proposition 2.5 levy limit. It is a responsible budget, and one that was approved unanimously by the City Council. The Council needs to act now to avert the potentially serious and damaging consequences of their lack of action.

As far as the Tribune editorial of December 23 goes it cites a non-existent budget “shortfall” of $12 million dollars. That is the number I cited as a cash flow deficiency in the event a tax bill is not sent. It is not a budget shortfall. The budget itself is balanced, and setting the classification factor is simply an outgrowth of the budget that was adopted. Why the reference to a budget shortfall keeps occurring is a mystery to me. It is interesting to note that Haverhill and Andover have both set factors, and both raised the average residential tax bill. I must have missed those editorials. And although the Tribune rightly notes that taxpayers are paying for snow removal and trash collection it would be nice to point out that we charge no fees for school athletics or school busing. We provide city wide recycling, and our negotiations for trash tipping fees have resulted in a huge decrease in those costs this year. I have been a careful steward of the public dollar and I have fully participated in the wage cuts that helped us to a budget where we had no layoffs, no service cuts, an increased allocation to our library, and a protection of the services we provide to seniors, as well as being under the Prop 2.5 levy limit by over a million dollars. The budget, and the values that are reflected in that budget, are good values and represent fairly what I campaigned on. I hope that the City Council shares those values and votes a classification factor that allows the City to move forward.

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6 Responses to Tax Demagoguery

  1. Tom says:

    “As far as the Tribune editorial of December 23 goes it cites a non-existent budget “shortfall” of $12 million dollars. That is the number I cited as a cash flow deficiency in the event a tax bill is not sent. It is not a budget shortfall. The budget itself is balanced, and setting the classification factor is simply an outgrowth of the budget that was adopted. Why the reference to a budget shortfall keeps occurring is a mystery to me.”

    I am sure for the same reason they keep lying and saying Wilfredo Laboy is “SUSPENDED” when we all know he has NEVER been suspended. They like to take those kind of liberties when it comes to people they are mad at or don’t like. Guess you are on the list! Don’t worry Mayor, you are aces in our book.

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  2. Bob LeBlanc says:

    Noted your explanation in Tribune. It seems that the Council wants to agree with budget and labor contract decisions and then rescind the implemenation of those decisions when it comes time to pay the piper. It seems the wrong issue. THe Tribune continues to baffle.

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  3. Summer Lindstrom says:

    It is time for the City Council to step up to the plate and vote to fund the budget they approved. The tax factor is the same. It is the distribution that has changed. The State Dept. of Revenue would not allow the commercial rate to go up as much as the city wanted. So….. costs had to be shifted back to the residential rate. This is still a very responsible budget with a minimal increase to the tax payers. Methuen is still the best managed City in the Merrimack Valley. Look at Andover, North Andover, Haverhill and most assurredly Lawrence, they have all imposed fees of one kind or another over and above taxation. By raising the taxes just a bit and not charging fees everyone wins. The city is not sued by the unions for not honoring thier contracts and the citizens continue to get to deduct (in taxes) the full cost of obtaining those services. When services are charged separately i.e. school busing fees, sports fees, etc. they ARE NOT tax deductible. I vote for raising taxes a bit to make sure no fees need to be imposed. The Council should do their job a vote to set a tax rate that will fund the budget they approved, prevent costly law suits AND prevent separate fees.

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  4. Jules Gordon says:

    Your Honor – The Big Picture

    After you get through with all this folderal, you are not out of the water. In fact, you are drifting out to sea.

    I believe, budget wise, you are almost out of room to maneuver for the next budget and the one following that. The string is pulled all the way out. It appears that taxes go up and budget are to be cut and jobs lost

    Can the town buy a lottery ticket?

    You picked a lousy time to win your job.

    Happy New Year.

    Jules

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  5. Bill Manzi says:

    Happy New Year Jules,

    The budget outlook for the next fiscal year is indeed bleak. It is truly a challenging time to be Mayor in any city in Massachusetts. But we will pull through as a City.

    Bill

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  6. Fred Mertz says:

    Mr. Mayor:

    “Facts and details can be bothersome things”

    Truer words have seldom been spoken.

    If this at all helps, try to channel Sam Rayburn:

    “Any jackass can kick a barn down,” Rayburn colorfully said in 1953, “but it took a carpenter to build it.”

    -FM

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