Finance Space

At a special Westport Board of Finance meeting on Monday night, the board voted 4 to 3 along party lines, with Republicans opposed, to lower the increase in real estate taxes to 4.98 percent from the previously voted-on 7 percent increase.

Republicans had wanted an even lower, 4.72 percent increase, “in line with the previously approved budget,” according to an email to the Minuteman from Republican Charlie Haberstroh.
However, Democrats asked for a 5.25 percent increase early in the evening.
Around midnight, First Selectman Gordon Joseloff suggested a compromise half-way between the two figures at 4.98 percent. It was the First Selectman who had asked for the special meeting in the first place.
The original 7 percent increase had taken many people by surprise. Joseloff’s town budget, as approved by the RTM, increased only 3.9 percent to $59.6 million. The larger education budget, including costs for bonding, came in at $109.2 million, a 5.15 percent overall increase, even though the schools’ operating budget increased by 5.7 percent.
The increase in the combined town and school budgets was 4.72 percent, the rate by which Republicans wanted to increase taxes.
However, on Monday night, the four Democrats agreed to make the mill rate 14.41 percent which is up from 13.73 mills for the current year. The new mill rate means that, beginning with the new fiscal year July 1, residents will pay $14.41 in taxes for every $1,000 of assessed valuation. The owner of a home assessed at $1,000,000 would pay $14,410 in real estate taxes.
The original 7 percent increase was deemed necessary because of an accounting change that made it desirable in the eyes of Democrats to fully fund retirees’ health benefits in an irrevocable trust. The health benefits actually cost $1.7 million per year, but actuaries hired by the town determined that the town should put $2.4 million into a separate fund every year for 30 years.
Otherwise, the change in accounting rules would force the town to treat the $1.7 million as a liability. Board chair Jeffrey Mayer thinks that this would cause the town to risk getting a negative review with credit rating agencies.
The board decided on Monday night to take $2.9 million out of the town’s reserve fund in order to lower taxes, compared to a previously agreed upon $1.5 million.
Mayer said that means that the town reserves are now 7.4 percent of the total budget. “That’s still a significant number” said Meyer, explaining that the reserves are there to be used for such unanticipated costs as litigation, clean-up from severe storms, and excess snow removal. Rating agencies usually require reserves of about 5 percent of the total budget, he said.
“We’ve always budgeted conservatively,” said Meyer, “so that, at the end of the year, the reserve funds increase by about $3 million.”
An email from Republicans Avi Kaner, Charlie Haberstroh, and Ed Iannone, said they did not support shifting “significant funds from the Town’s dwindling reserves.”
Iannone said that, according to actuaries, a more phased-in approach was reasonable.
On the other hand, Mayer said Tuesday that “The fact that we (Democrats and Republicans) had a slight difference of opinion is less significant than that we worked our tails off to bring the budget down to this level.
“Last night, Gordon (Joseloff) proposed a list of six items in the capital non-recurring budget that he said weren’t needed. That’s a reflection of the fact that it’s not business as usual. If anything, the last few weeks have been a wake-up call to town officials to scrutinize the budget more thoroughly,” said Mayer.
Last Thursday, state legislators also approved a continuation of the conveyance tax, levied when a home is sold. Last year this brought the town $900,000. Mayer said that Joseloff conservatively estimated that revenue from that tax this year would be only $600,000 because, he said, home sales are down 30 percent.
Mayer said that by fully funding the trust for retiree benefits, “we’ll save the taxpayer over $30 million, because we earn interest income on the trust.”
The trust has not yet been set up. It will have to be approved by the Board of Selectmen and the Representative Town Meeting. However, Mayer said he thinks it is prudent to have the funds set aside.

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Tags: Finance, tax