Today, Tuesday, July 14th at its regular meeting the selectmen will hear from Town Manager Hinchey about the outlook for FY11. The Town Manager and CCT may agree: The outlook is grim. The session will be shifted back to Town Hall (from the Community Center) so it can be televised live on Channel 18; the session will be posted on the town’s website for on demand viewing. The meeting begins at 4:15 this week.

As you may recall, CCT had urged more moderate spending for FY10 in anticipation of a very difficult FY11. Despite our urging, town officials secured a narrow victory for their spending plan at Town Meeting, which even took money from the town’s Stabilization Fund to support all the spending that was in the budget. Spending for FY10 approved by Town Meeting was far in excess of regularly recurring revenues expected for FY10. (Our estimate was $2 million; this number is disputed by the Town as too high, but there is no dispute that spending for FY10 as approved was in excess of such revenues by a significant amount.) The good news is that the Town does have the power to start spending less now to conserve cash to help avoid drastic action later.

Besides the property tax, local receipts are the biggest additional source of income for the town -- almost $9 million. Hotel/motel taxes, excise taxes on motor vehicles, trash stickers and so forth. FY09 and FY10 revenue estimates for local receipts were the same. While FY09 figures are not yet available, they almost certainly will fall short of forecast and could be off by several hundred thousand dollars. The Town Manager has stated they are declining. That decline is likely to continue into FY10 and possibly FY11.

CCT appeared before the selectmen on June 23rd to make a statement about FY11, which said in part this:

Unless some new money magically materializes, there does not appear to us to be any onetime fix available for FY11. So-called free cash left over from FY09 is likely to be far less than in prior years and emergency funds are already below where they should be. Of course some money can be generated for FY11 in FY10 by curtailing various expenditures.

The challenge of FY11 is much more difficult since the reality of a changed world was not faced in FY10. Absent a miracle, FY11 spending will have to be cut substantially below FY10’s planned spending. Some combination of voluntary and mandatory freezes and cuts in town employee compensation and lay-offs are likely to be necessary parts of the solution. And that probably won’t be enough.

On top of the costs of running the Town, taxpayers will be faced in FY11 or FY12 with substantial increases in property taxes to begin paying for the way-too-expensive Annex Project and the massively expensive sewer project.

New union contracts cannot continue the rich promises of increases and benefits of the past. Cities and towns across the nation are looking for multi-year freezes in union contracts, merit increases based on performance instead of automatic income step increases, elimination of various benefits and shifting from pension plans to defined contribution plans. Chatham will have to do the same, the sooner the better.

In planning for FY11 we ask that the interests of the taxpayer be taken into account, as we had hoped would be done for FY10. Our advice, respectfully proffered, is this: Start making cuts in FY10 spending. For FY11, assume no increase in the core property tax levy; assume no overrides or capital exclusions. The aim should be to reduce spending to fit within realistically expected revenues.

We understand that this will be extraordinarily difficult because of the mushrooming of debt service costs on top of the need to make cuts in other expenses. No doubt some projects will have to be deferred, some programs will have to go and staffing will have to be slimmed . . . . [O]verspending, continued into the FY10 spending plan, has now brought about this crisis, which will probably last longer than FY11.

We at Chatham Concerned Taxpayers are ready to do what we can to help the Town get through this very difficult period, but the solution must not be put on the backs of the taxpayers of Chatham.

For FY11 there will freezes and possibly reductions in compensation, certainly no 6% increases as in FY10. The schools will have to restrain spending, too.

There will be a tendency to say “We must raise taxes.” No. The Town should aim to balance the budget without any increase in property taxes. The property tax levy for FY10 was increased $770,000 to pay for salary increases. Not again.

The state has adopted legislation that will allow Town Meeting to authorize a 2% increase in the hotel/motel tax (could be effective August 1) and a 0.75% increase in the meals tax (could be effective October 1). No doubt local merchants who opposed the 25% increase in the sales and meals tax will not like the idea of an increase in local taxes. A special town meeting to approve such taxes may be called in the fall. Our preliminary estimate is that both taxes, if approved by Chatham Town Meeting, should yield at least $750,000 - $1 million in their first year. If approved, these taxes should be an opportunity for property tax relief, not more spending.