NewburyportNews.com, Newburyport, MA

Local News

December 5, 2012

Mayor rejects tax relief option

Kezer says offsetting tax rate with free cash is 'poor' planning

(Continued)

Free cash refers to any unspent tax income left over from the previous year. Proponents of using free cash have argued that the city should take that unspent money and use it to offset tax increases similar to the way Newburyport has done in recent years. The Daily News published an editorial endorsing this position last week.

Kezer doesn’t believe that’s the right approach, and Michael Basque, the city’s chief financial officer, has also argued that using free cash to subsidize the tax levy would have hurt the city’s long-term financial stability, and ultimately its bond rating as well.

“This is why one of the reasons that I always recommend that we don’t use free cash to lower the tax rate,” Basque said. “(The fact that) we haven’t done that is one of the main reasons that we received this upgrade.”

Kezer said the city’s reserves are intended to be available in case of emergencies, adding that the city has made a conscious effort to build its reserves and to stay under the levy limit so that it doesn’t wind up in a position where it suddenly doesn’t have enough money to pay the bills.

“That creates a structural deficit because you’re using your reserves to keep your operations going,” Kezer said.

Kezer said the city’s stabilization fund was at roughly $1.3 million and the free cash account was at $1.274 million for the upcoming year. While technically not a reserve fund, Kezer noted that the city is also $1.8 million under its levy capacity.

Regardless, many residents have spoken out against the new tax rate and are demanding a solution, whether it comes from free cash or somewhere else.

Mike Buetow of Cabot Court is arguing that the city should cut spending. Earlier this week, Buetow began circulating a petition that he hopes to present to the City Council.

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