Chatham fiscal 2011 budget: 2009 Archives

It seems as if many resident taxpayers had their assessments go up although the town's overall valuations remain roughly the same. Most of the increases appear to be in the valuation of land, not buildings.

We anticipate sharp increases in property taxes in the very near future. Chatham is already number one on Cape Cod in per capita spending for capital projects. If bonds are sold for the 38,000 square foot PD/Annex project ($17 million) and the sewer treatment plant upgrade ($50-$60 million) in this assessment period, debt outstanding will more than triple to about $100 million. (We had urged town officials to defer non-emergency capital projects until better economic times return, but they rejected that appeal.)

When debt service payment starts on these two projects, the cost of debt service on the property tax will go up more than 250% over what is in the budget for this fiscal year. So if you're paying $270 for debt service this year, expect the bill for debt service to be close to $700 when those payments start, if not more.

And, of course, we don't know what will be required for fiscal 2011 operations. CCT believes and so stated that the fiscal 2010 spending plan presented by town officials at the Annual Town Meeting was in substantial deficit, calling for spending $1 million, perhaps even more, than revenues expected to be received in fiscal 2010. CCT's call for fiscal prudence was ignored as compensation increases for public employees ranging as high as 6, 7 and 8% -- plus benefit increases -- were awarded. Almost all full-time town employees receive more in compensation than half the households in Chatham have income to live on.

So one should consider carefully whether to file for an abatement of assessment this time around.

The first real property tax bill to pay for fiscal 2010 will be going out in mid-December, we have been told. Abatement applications must be filed within 30 days thereafter.

Click on this link to obtain a copy of the Abatement Application form.

The new Chatham assessments are out!

These will be used for the next three years. They will be the measure of your property taxes when the debt service for Big Sewer begins to hit along with the debt service for the luxurious PD/Annex.

And, of course, your tax payment will go to pay for this fiscal year's spending, which soared far above that of fiscal 2009.

In case you forgot, this fiscal year's spending includes pay raises for all public sector employees, averaging around 6%, some as high as 7% and 8%. Plus increases in pensions and reimbursement for health insurance costs. You'd never know we're experiencing the worst recession since the 1930s.

Check you new assessment and compare it to your present assessment to see if it is higher, lower or the same. Having checked a sampling, some go up, some go down compared to prior years.

You have a week (through November 11th) to go to Town Hall to complain if you don't like what you see.

Later on, those thinking of abatements should know that there is a short window once the tax bills are sent out, so it's important to move promptly. You can download the Abatement Application form by clicking here. Your Abatement Application must be filed by the date your first (of two) tax payment is due. The due date will be on your property tax bill that will be in the mail in a few days in all likelihood.

Click on this link to find your new assessment number.

Chatham Concerned Taxpayers this past spring urged town officials to postpone capital projects until the economy turned around. Instead, they accelerated the massive $340 million sewer project and pressed ahead with the $17 million PD/Annex (a 38,000 square foot twin-building plan for a handful of town employees) so that the debt service for the two projects will begin hitting property taxes with a big bang soon. First year hit for the PD/Annex bonds will be about $160 and $250 for the first of many sewer bonds issues for the $600K household.

One thing is sure. Chatham property taxpayers are going to pay. Chatham is already an expensive place to live, forcing a steady migration of families out of town. Just since the year 2000 or so, the Chatham school population has plunged from about 700 to 500, some 30%.

Chatham is #1 on Cape Cod for per capita spending on capital projects. It will surge ahead even farther when the debt service for the first sewer bond and the PD/Annex bond hit in 2012 or 2013.

Debt service on the property tax in fiscal 2010 is only $2.7 million. If the first payments for these two bond issues come due in 2012, debt service on the property tax could leap as high as $9.2 million, depending on how the town does its accounting.

For the $600,000 householder, who paid about $253 in property taxes for debt service in fiscal 2010, that could mean an additional $611. In addition,of course, will be the annual increases for Proposition 2 1/2 and new growth, which add together add about 3.7% to the property tax each year.

The overall leap in property taxes from fiscal 2010 to 2012, say, could be 34% for all homeowners.

In fiscal 2012 it could be $9.2 million!! ($5.1m of existing debt + $2.5m for sewer bond + $1.6m for PD/Annex.) A 460% increase over fiscal 2009. (If the sewer bond of $50 million (assuming $10 million in stimulus aid) is at zero interest, the increase will "only" be 420%.)

Last week there was bad news for Massachustts. While the national GDP for the third quarter was reported to have surged 3.5%, the Massachusetts GDP dived 1.1 %. The governor announced new state employee layoffs would be in the thousands.

At the same time in the Massachusetts enclave of Chatham, free of the worries of the national and state economies, the selectmen are discussing where they will get the money for fiscal 2011 (beginning next July 1) to pay for union pay raises such as the 8% built into the school union contract. And whether or not they should offer a cost-of-living increase when price increases have been non-existent for the past year, with the consumer indexes falling below zero! Social Security recipients aren't getting a cost-of-living increase, but Chatham public employees might.

The fat schools union contract is just a touch richer than the fire union contract negotiated by town officials and approved by the selectmen last October - December as the economy was in free fall. Under that contract fire department employees are enjoying 7% increases during the current fiscal year.

Already, almost all Chatham full time employees receive more in compensation than the incomes that half the households in Chatham have to live on.

For fiscal 2010, the selectmen asked the unions to consider reopening their contracts to negotiate reduced increases. As soon as one union said no (the fire union), that cost-saving idea was discarded and the spending plan went through granting all public employees an average increase of 6% - as well as increases in pension and health care benefits.

A similar request has been made to the unions about fiscal 2011. Based on past experience, one cannot be optimisitic that the public unions will take the economic condition of taxpayers into consideration.

Massachusetts downturn deepens

U.S. economy heads up as state’s falls further

By Jay Fitzgerald | Friday, October 30, 2009

Massachusetts may be mired in a recession through the end of the year, even as the nation’s economy tentatively pulls out of the worst downturn in decades, according to reports released yesterday.

On the same day Gov. Deval Patrick announced major layoffs in state government, the University of Massachusetts reported that the state’s economy shrank by about 1.1 percent in the third quarter - as indicated by increasing corporate layoffs and plunging tax revenues.

“We’re at the bottom and we might bounce around there for a while,” said Michael Goodman, co-editor of the report and chairman of UMass-Dartmouth’s department of public policy.

Meanwhile, consumer confidence in Massachusetts has dipped for the first time in two quarters amid fears of economic hardships ahead, Mass Insight reported yesterday in a separate report.

“Some people are concerned that next year is a big black hole,” said William Guenther, president of the Boston research organization.

The gloomy Massachusetts news was in stark contrast to a national report yesterday that the U.S. economy grew by 3.5 percent in the third quarter, unofficially ending the nation’s longest downturn since the Great Depression.

Economists warned that the federal government’s stimulus spending may mask the true picture of the nation’s economy. The government’s “cash for clunkers” auto program and the $8,000 tax credit for first-time home buyers helped the economy earlier this year, they said.

But the “cash for clunkers” program is now over, while the fate of the tax credit is up in the air.

Goodman said the U.S. economy, as a result, may not be much better off than the Massachusetts economy.

The UMass study estimated that the state’s economy will be “flat” through the end of this year - and probably won’t start growing until early next year.

Alan Clayton-Matthews, a Northeastern University economist and co-editor of yesterday’s economic report, said the state’s technology sector is slowly expanding in reaction to the tentative national growth, so it could boost Massachusetts in coming months.

But he said he’s still concerned about the national economy - and the risk of a “double dip recession” in the near future.

Some observers, including Patrick, have touted the possibility that the state’s economy might emerge as a leader in any recovery. But those hopes seemed to be dashed by yesterday’s economic data.

The Chatham Board of Selectmen knows there will not be the money to pay for the usual spending increases in FY11 (6.5% on average over the last nine years). CCT delivered the message on June 23rd to the Board that overspending has finally caught up with overtaxing. (We plan a similar communication to the School Committee.)
Our key suggestions to the Board of Selectmen:

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.

CCT did meet informally with the Town Manager, who agreed that FY11 might well require freezes and cuts in services and personnel. State and local revenues are declining. We indicated we did not want to be “unnecessarily adversarial” and hoped we could find some common ground. We certainly will support realism that takes into account the interests of taxpayers and town officials who make the necessary difficult decisions.

Of course, there is always the chance that money will magically appear from places yet unknown or means will be employed to increase the property tax levy without taxpayer consent.

Tuesday this week (August 4) presents a double-header opportunity to hear what town officials have to say.

• At 4 o’clock the Selectmen meet and the Town Manager will discuss the FY11 budget at the tag end of the agenda. (Town Hall downstairs, televised on Channel 18, on the Town’s website next day)

• At 7 o’clock in the Chatham Community Center the Town Manager and other officials will discuss the budget, the Wastewater Project and other issues at the Summer Residents Annual Meeting. CCT met with the group’s leadership a short time ago and presented our views about Town overtaxing and overspending, the escalating budget squeeze and the huge cost burdens to taxpayers of the planned Wastewater Project that could start hitting as soon as FY12. (Not televised, but will be posted a day or two later on the Town’s website)

Taxpayers should attend or view both meetings to gauge how seriously taxpayers’ views are being considered.

Town officials will schedule a special town meeting, probably in October, to consider the adoption of new local taxes – 0.75% to be added to the meals tax and 2% to the 4% hotel/motel tax already going to the Town. The state authorized these local option taxes earlier this year. Should the Town burden local businesses with these taxes? Should the Town get more to spend or should the taxpayers get property tax relief if the taxes are approved?

Though it’s summer, important things are happening. Remember, Town Meeting has the power to say “YES” or “NO” to whatever is proposed. Taxpayers almost sent back for a rewrite the too fat, overspending FY10 budget.

Taxpayers can and will be out in force to demand the Town face reality in FY11. Discussion on FY11 are starting now and for the first time the Finance Committee will work shoulder-to-shoulder with the Selectmen on the budget. That’s a big plus.

We are looking into solving the wastewater pollution problem for a lot less money than what the Town is planning to spend.

All Cape towns, including Chatham, will soon be faced with a choice of imposing additional taxes, adding 0.75% to the meals tax for everyone and a full 2% to those who stay in hotels, motels and lodging houses for stays of up to 90 days. Chatham already collects 4% on such stays, while the state gets 5.7%. A visitor will then be paying 11.7% on the room rate.

A special town meeting will no doubt be called for Chatham this fall to seek approval of the new taxes. Any new taxes should be directed to property tax relief, not additional spending. Chatham already is overspending its revenues and needs to trim spending to fit within available revenues and not count on continually raising property taxes to cover overspending.

Yarmouth residents face taxing decision
By Patrick Cassidy Cape Cod Times
pcassidy@capecodonline.com,
rgold@capecodonline.com
July 30, 2009 6:00 AM
SOUTH YARMOUTH — Residents will decide in September whether the town should add two new local taxes to help pay for a budget shortfall.

The budget signed by Gov. Deval Patrick this summer lets municipalities add a local hotel use tax and meals tax. The board of selectmen voted Tuesday to hold a special town meeting Sept. 29 to decide whether to adopt the extra taxes. The board hasn't decided yet whether to support the plan.

If town meeting approves the meals tax increase, it would add an additional 0.75 percent tax for meals on top of the 1.25 percent increase Gov. Deval Patrick signed into law last month. The total sales tax for meals would be 7 percent.

A separate article on the warrant would add 2 percent to the local tax on hotel stays, raising the local hotel tax to 6 percent. The state charges a tax of 5.7 percent on hotel stays, so adoption of the local tax increase would bring the total tax to 11.7 percent, or $17.55 for a room that costs $150 a night.

The proposed tax hikes could help reduce the town's budget shortfall of more than $930,000, including more than $530,000 lost in state aid for the 2010 fiscal year. "There is no guarantee which way a vote would go in town meeting," Selectman Suzanne McAuliffe said.

If approved in September, the new taxes would start in January. Town officials estimate the new taxes could generate $250,000 in the fiscal year that ends next summer, McAuliffe said.

Robert DuBois, executive director of the Yarmouth Chamber of Commerce, said the extra taxes could keep tourists from visiting the area or spending money in town. "There is a lot of price sensitivity right now," DuBois said. "A few extra bucks on top of a room for a three- to five-nights' stay means less money they can spend elsewhere in the community."

Mortimer Zuckerman notes this:

State and local governments, representing about 15% of the economy, are beginning the worst contraction in postwar history amid a deficit of $166 billion for fiscal 2010, according to the Center on Budget and Policy Priorities, and a gap of $350 billion in fiscal 2011.

While Chatham is better off than most, is it immune?

No way.

To cover all the spending the Town wanted to do for FY10, the Town reached into its emergency funds and ran its free cash down to zero. No belts were tightened, no programs were foregone. Salaries surged 6% and more.

The job picture is abysmal, which means the national economy, in Zuckerman's words, "is even worse than you think."

Chatham doesn't get much aid from the state, so its troubles will not result in too much of a fall-off for Chatham's income. However, as a vacation paradise, consumer spending is important.

Zuckerman:

Households overburdened with historic levels of debt will also be saving more. The savings rate has already jumped to almost 7% of after-tax income from 0% in 2007, and it is still going up. Every dollar of saving comes out of consumption. Since consumer spending is the economy's main driver, we are going to have a weak consumer sector and many businesses simply won't have the means or the need to hire employees.

and:

About 40% of U.S. workers believe the recession will continue for another full year, and their pessimism is justified. As paychecks shrink and disappear, consumers are more hesitant to spend and won't lead the economy out of the doldrums quickly enough.

The caution CCT urged for the Town for FY10 is desperately needed for FY11.

Does Mort Zuckerman know what he's talking about?

Zuckerman came to the U.S. from Canada and attended Harvard Law School. He saw opportunity in real estate and as a very young man became a multimillionaire. He still is chairman of one of the nation's leading real estate investment trusts, which he established during his many years in Boston. Now he is also the editor-in-chief of U.S. News & World Report and he owns the New York Daily News.

He knows what he's talking about.

Read the whole thing.

OPINION JULY 15, 2009 Wall Street Journal

The Economy Is Even Worse Than You Think

The average length of unemployment is higher than it's been since government began tracking the data in 1948.

By MORTIMER ZUCKERMAN

Continue reading "NATIONAL MELTDOWN WILL HIT CHATHAM"

Posted by Chatham Concerned Taxpayer on Tuesday, July 14, 2009 at 7:11 PM | Comments (0)
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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.

It's time for public employees to join the real world in which there are no guaranties of employment or retirement.

In fiscal year 2011 the Town of Chatham has no money to support fat pay increases for public employees such as they are enjoying in this fiscal year (July 1-June 30) -- 6%, something virtually no one in the private sector has. The overspending in FY10 means there is no choice but a salary freeze in FY11.

But real reform is needed. The days of fat built-in salaries and benefits are over.

The New York pension situation the following article describes is pretty much the same for Chatham.

In New York (as in almost every state), public-employees' pensions are defined-benefit -- meaning that the government guarantees an income stream based on peak salaries and career longevity. By private-sector standards, benefit levels are extraordinary: Our state and local government employees (and employees of public authorities) can retire earlier, with larger pensions, than the vast majority of those who pay their salaries.

In Massachusetts, some reforms seeking to end abuses enhancing pension benefits at the state level became law just a few days ago. Predictably, the public unions sued the state to hold on to these abusive practices.

In Chatham, pay packages for full time public employees provide them more money than what more than half the households live on. And their pensions start earlier and are larger than the [retirement benefits of the] vast majority of those who pay their salaries.

On public employee pensions, real reform is needed "by essentially throwing out the outmoded defined-benefits model for future employees."

Chatham should "follow the lead of a few states, including Michigan, that have shifted nonuniformed government workers to defined-contribution accounts -- like the 401(k) plans that have come to dominate the private sector."

Reform has to start sometime, somewhere in the Cape towns. It can start in Chatham. Other Cape towns are sure to follow Chatham's lead.

With a defined-contribution retirement system, taxpayers would no longer bear all the financial risks associated with providing guaranteed pension benefits. For the first time, public-pension costs would become both predictable and easily understandable -- and the real costs of proposed benefit increases would be transparent.

There are plenty of other areas that need reform that will bring public employee compensation into line with private sector reality. Let the taxpayers' voices be heard.

Read the whole thing.

DEFUSE THE PENSION BOMB
E.J. MacMahon
New York Daily News
July 9, 2009

NEW York's public-pension system has become the epicenter of an in fluence-peddling scandal that has at tracted the attention of the SEC as well as state Attorney General Andrew Cuomo. But the millions in shady "placement fees" pocketed by a few politically connected middlemen are small change compared with the mushrooming cost of lavish pension benefits for state and local government retirees.

Keeping these retirees in clover could require $5.4 billion more from local taxpayers outside New York City over the next five years, if investment returns follow one scenario floated by the state comptroller's office. And the real scandal is that politicians are reluctant to do anything about it.

In New York (as in almost every state), public-employees' pensions are defined-benefit -- meaning that the government guarantees an income stream based on peak salaries and career longevity. By private-sector standards, benefit levels are extraordinary: Our state and local government employees (and employees of public authorities) can retire earlier, with larger pensions, than the vast majority of those who pay their salaries.

Taxpayers must shoulder the risks of covering these promised benefits. The pensions are paid out of gigantic pooled retirement funds, to which government employers contribute varying amounts, depending on actuarial assumptions and market fluctuations.

Since 2000, the combined yearly pension costs for all governments in New York (including New York City), have risen from slightly under $1 billion to nearly $10 billion -- reflecting both market conditions and benefit increases effective at the beginning of that period.

New York City's annual pension contributions alone are up more than $3 billion over the last five years -- and projected to rise by another $1 billion over the next three. Annual pension bills for the state and its local subdivisions could easily double or triple by 2015.
Under the state Constitution, pension benefits can't be "diminished or impaired" for any current member of a public-retirement system in New York. So it will be hard in the short term to stem the tide of mounting pension costs. The reform debate is really about compensation for the next generation of government workers -- and the long-term impact they'll have on state and local finances.

Far-fetched as it may seem, given state lawmakers' shameless pandering to unions in recent years, there is precedent for reform: During the '70s fiscal crisis, the Legislature managed to scale back pension benefits for new public employees. But the unions spent most of the next 25 years successfully clawing back much of what they'd lost.

There's a risk that the same thing will happen again if Gov. Paterson somehow wins approval of his modest reform proposals. Paterson's "Tier 5" pension plan, applying only to future state and local employees, would: raise the retirement age to 62 (same as the Social Security minimum); increase the pension-vesting period; require employees to contribute to the pension fund throughout their careers, and curb the practice of padding pensions with overtime. In the main, all this would simply replicate the Tier 3 and 4 benefits of the mid-'80s.

The governor has proposed more dramatic changes in police and firefighter pensions. He'd change the current "20 and out" plan -- retirement at half pay after 20 years, with no minimum retirement age -- to half pay after 25 years at a minimum age of 50. Mayor Bloomberg projected that this would save the city $200 million a year almost immediately.

Real reform, however, would go much further -- by essentially throwing out the outmoded defined-benefits model for future employees. New York should follow the lead of a few states, including Michigan, that have shifted nonuniformed government workers to defined-contribution accounts -- like the 401(k) plans that have come to dominate the private sector.

With a defined-contribution retirement system, taxpayers would no longer bear all the financial risks associated with providing guaranteed pension benefits. For the first time, public-pension costs would become both predictable and easily understandable -- and the real costs of proposed benefit increases would be transparent. With normal turnover, between a quarter and a third of state and city employees would be in the new system within a decade.

If pension reform were subject to regular contract negotiations, public-employee unions would never accept a shift to defined-contribution plans. But this is a rare case in which elected officials can alter a fringe benefit without the unions' consent -- because the state's Taylor Law, which governs public-sector labor issues, specifically prohibits collective bargaining on pensions.

Thus, retirement benefits could be changed legislatively, ensuring that future generations of New Yorkers aren't stuck with the same pension problem. Unfortunately, leading politicians like Paterson and Bloomberg continue to seek union permission to make any changes.

It's time for these officials to reassert their managerial prerogatives -- and to understand that government unions will never voluntarily relinquish the gold-standard pensions that taxpayers can no longer afford.

--E.J. McMahon is a Manhattan Institute senior fellow and -RD>directs the Empire Center for New York State Policy. ejm@empirecenter.org.

Chatham's rich flow of property tax revenues from second home owners -- who impose little in the way of extra costs on the town -- has enabled Town government to maintain a expensive lifestyle much more than it has kept property taxes low for resident taxpayers.

The fruits of this expensive lifestyle of Town government show up principally in two ways: extravagant building projects and unsustainable compensation arrangements with public unions.

The 22,000 square foot underutilized $10 million community center and the $17 million 40,000 square foot Town Hall annex to house a handful of town employees during working hours are current examples.

The most extravagant of all is just being launched now: a 100% townwide sewer system costing hundreds of millions of dollars. Everyone agrees that the chemical pollution of our ponds and embayments should be halted, but not everyone agrees such a massive undertaking is the only answer.

A review of the Comprehensive Wastewater Management Plan does not yield convincing evidence that cost-effective alternatives, particularly those employing newer technologies, were -- or are being -- seriously considered.

Our neighboring town of Orleans, also considering a large sewer system, has engaged a third-party consultant to conduct a cost-effective analysis of its sewer plan and has already learned that a major part of the proposed system may not be needed at all. This process is ongoing under the auspices of a special citizen Wastewater Management Validation & Design Committee.

This peer review is being conducted by the Woods Hole Group, an environmental organization respected worldwide, that Chatham has employed in the past. Orleans is also monitoring the kinds of alternatives under review at the Waquoit Bay National Estuarine Research Reserve to save water and lessen the need for wastewater infrastructure.

Chatham should do the same. Spending on this project will stretch out over at least 20 years, so there will be plenty of opportunity to adopt new possibilities and save many millions of taxpayer dollars in doing so. Even Democratic Cape legislator Representative Matt Patrick thinks this can be done and it would be irresponsible not to explore every option.

The other area in which the Town government displays its extravagance is in staffing and compensation of personnel. In this regard, Chatham is not alone. Chatham, like many other cities and towns, is in the grip of public service unions whose contract demands relentlessly push up costs beyond what would be reasonable in the private sector. Iron-clad contracts are signed with unions promising compensation and benefits come hell or high water, regardless of economics or revenues or the interests of those who pay the bills.

These outmoded arrangements are finally getting national and state attention and need to be addressed at the local level as well. Chatham has several collective bargaining agreements, the principal ones being for school teachers, the police department and the fire department. The police contract has expired and is in negotiation, the fire department contract is in the second year (FY10) of a three-year contract and the schools contract ends in FY11.

The time to seek dramatic change at the town level has arrived. 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.

This unacceptable situation was addressed by David Luberoff of Harvard's Rappaport Center recently:

[H]ealth insurance [cost] is just the tip of the iceberg. The high cost of fully funding pensions and other postretirement benefits will continue to stress local budgets. Local officials’ ability to make needed changes are greatly limited by an outdated civil service system that bases promotions on test-taking and collective bargaining agreements that make it easy to challenge any changes to existing routines. Why, for example, does every town need its own emergency dispatch system? Why do many localities have separate systems for police, fire, and emergency services? Yet any effort to change these practices runs into a host of seemingly insurmountable obstacles.

Local officials are not blameless. State law, for example, gives them the power to greatly lower health insurance costs by requiring retirees to enroll in Medicare, a federally funded program. But many localities have not yet taken advantage of this option, not least because of resistance from retirees.

Such changes are hard to achieve because relatively small groups of individuals strongly oppose them. But the status quo may not be an option.

Costs are going to keep rising, revenues will remain flat, and the demand for services will not decline. Local policy makers, therefore, will have no choice but to reexamine longstanding practices and assumptions.

The Town of Chatham did not come to grips with this unsustainable situation in its FY10 spending plan, granting salary increases of approximately 6% across the board when local taxpayers were experiencing devastating losses in their life saving and reductions in their incomes. There is a severe disconnect from reality when public employees are receiving such large pay increases when on average they already earn more than half the households in Chatham live on.

Chatham taxpayers area facing sharp increases in property taxes because of the debt service costs of extravagant infrastructure projects. It is therefore all the more urgent to hold the line on property taxes for all other Town spending. No increases in the property tax levy for FY11.

As we have reported, town officials skillfully led confused voters at the May 11th town meeting to narrowly approve -- with more than 340 objecting -- a $34.4 million spending plan for FY10 that is about $1.8 million in excess of revenues expected for the fiscal year.

The money to cover this deficit is to come from emergency and other reserves and free cash left over from FY08. The main emergency account the Stabilization Fund is now below the target level of $2 million set several years ago.

While property tax revenue is fairly predictable, state aid and local receipts are not. CCT and the Finance Committee were particularly concerned whether local receipts, projected to be almost $9 million, were holding up. Despite repeated requests for trend information from town officials, neither CCT nor the Finance Committee had received such information by the time of Town Meeting. It hasn't been provided yet.

However, at a Finance Committee meeting on June 18th and a Summer Residents board meeting on June 26th the Town Manager made passing references to “declining revenues.”

From figures we did obtain, through 11 months of FY09, estimated (not actual) local receipts were running about $700,000 behind the 11-month estimates of FY08. Whether the gap is closed at fiscal year-end when estimated receipts become actual receipts remains to be seen. But there does seem to be a downward trend, which is no surprise, since that is what other Cape towns are experiencing. CCT's present estimate is that local receipts will fall short of official estimates for FY10 by about $600,000. But we need much more information to be sure about this estimate.

Therefore, in FY10 the Town will be embarking upon a spending plan that is in deficit by at least $1.8 million and experiencing “declining revenues.” The Stabilization Fund is below target level and can't be tapped again. Free cash from FY09 has been estimated to be only about $400,000, about 25% of the prior year's; it could be more or less when figures are final.

With less free cash and no reserve funds to tap, it does appear as if the Town will not have the money to even spend at the FY10 level in FY11.

Continue reading "CHATHAM SPENDING HITS THE WALL, PART 2 -- FY11"

Fiscal year 2010 begins today, July 1, 2009.

It's worth reviewing what this means for Chatham taxpayers.

In February, Chatham Concerned Taxpayers had urged the Selectmen, in light of the harsh economic realities suffered by resident and other taxpayers because of the world financial collapse, to hold FY10 spending to the FY09 level and not to increase the property tax levy.

The Selectmen spent several weeks reviewing the budget but did not make a single cut in the spending proposed by the Town Administration. What began as a proposed spending increase over FY09 of about $1.3 million wound up ultimately, after the Annual Town Meeting, as a spending increase very close to that figure. The core property tax levy was raised $770,000. In effect, CCT’s urging that the taxpayers’ interests in these difficult times be taken into account was ignored.

There was a real battle over the proposed spending increases on the floor of the Annual Town Meeting on May 11th. Taxpayers were angry at the proposed increase. At the same time they were understandably confused by the way the spending plan was presented in the Town Warrant. Town officials split the usual operating budget up into several pieces and scattered it over six Articles (excluding the water department, which is self-supporting).

This approach hid the true level of spending, which was far in excess of expected FY10 revenues, and how it was to be financed.

Continue reading "CHATHAM SPENDING HITS THE WALL, PART 1 -- FY10"