AMESBURY — The Amesbury City Council has called a special meeting this Monday night to discuss using the city’s “free cash” to reduce the tax rate on the eve of the annual tax classification hearing.
Last week, the city announced that next year’s tax rate would be increasing by $1.11 from $19.13 to $20.24, mainly as a result of diminishing home values. The announcement was met with a public outcry and prompted immediate demands for meaningful tax relief measures.
In response, several city councilors have come out in favor using the city’s free cash, or unspent tax money from the past year, to drive the tax rate down below the $20 threshold.
However, the council’s plan may be a moot point. Mayor Thatcher Kezer is opposed to such a move, saying it would amount to “poor financial planning.” The council does not have the power to overturn the mayor’s decision.
The special meeting will be held at the Ordway Building at 9 School Street at 7 p.m., and it appears a majority of the nine-member council is in favor of the resolution. Councilors Robert Gilday, Bob Lavoie, Christian Scorzoni and Derek Kimball all signed off on the special meeting request, and councilor Jim Kelcourse indicated that he supports the free cash proposal as well.
Gilday also wrote a letter to the mayor strongly urging that he direct a portion of the city’s free cash budget to help offset the expected increase, recommending that the city contribute enough free cash to reduce the rate to $19.99. According to city tax documents, it would take $443,731, which is a little more than a third of Amesbury’s free cash, to accomplish this.
Kezer has come out strongly against the idea of using free cash to offset tax increases, saying that using reserves to supplement the operating budget lends to long-term structural instability, which could hurt the city’s bond rating.
In a letter to the editor published by The Daily News yesterday, he called the high tax rate irrelevant and said the real figure people should look at is the tax bill, which is the actual amount that families pay in taxes.
“Tax rates don’t matter, tax bills do,” Kezer wrote. “When ranking average single family tax bills, Amesbury was ranked 69th in the state. A respectable rank for the level of services we provide.”
In his letter to the mayor, Gilday acknowledged Kezer’s concerns, but said given the steep increase in the tax rate, the city needs to show its willingness to address the rate and mitigate further increases in the future.
“Although I recognize that the tax bill itself — not just the rate — should also be taken into consideration, the steep increase in the overall rate has the very real ability to create a chilling effect on local economic activity while serving as a major deterrent to families that wish to stay or relocate to our community,” Gilday wrote.
Amesbury currently has $1,274,000 in free cash, along with $1.3 million in its stabilization account. Kezer said he wants to save $1 million of the free cash for emergency purposes while spending the rest on road repairs, school renovations and solar projects.
The city is also $1.8 million under its levy limit, which is the total amount that the city is allowed to raise in taxes by law annually under Proposition 21/2. Kezer said these reserve funds were a major factor in Amesbury’s bond rating being increased by Standard and Poor’s Rating Service earlier this week from an A to an A+.
Chief Financial Officer Michael Basque said he agrees with Kezer’s approach and that using free cash to subsidize the taxpayers would be no different than using it to cover budget shortfalls, which he called a losing long-term fiscal strategy.
Gilday agreed with that assessment, but noted that sometimes perception is just as important as reality, and having such a high tax rate could serve as a bad first impression to residents interested in moving to town.
“People tend to read headlines and not always the full story,” Gilday said.
Lavoie also pointed out that many communities use free cash to offset tax increases, including Newburyport and Salem, the latter which he said is planning on using as much as $1 million in free cash to lower their rate.
“It’s a legitimate financial tool in the municipal toolbox, but it’s a tool that the mayor and his administration don’t believe is a good practice to use,” Lavoie said. “But that’s their opinion and after Monday night, they’ll see that the council doesn’t agree.”
But regardless of what the council decides, the decision of whether to use free cash to offset the tax increase rests with Kezer alone.
“He has the final say on it; we don’t have any say,” Gilday said. “We can make our recommendations through a resolution, but the ball is basically in his court, and we have no say on that.”
Even if Kezer were to reverse course, however, the councilors said they understand that it’s too late in the year to implement the changes they want.
“At this juncture, it’s no longer a viable alternative simply because of the calendar,” Lavoie said. “The council would have to finish its work on such a measure and get it in to the state by Dec. 20 in order for the state to have enough time to certify the rate.”
After the special meeting, the council will gather for their regularly scheduled meeting on Tuesday at 7 p.m. in the City Hall auditorium. That meeting will include the annual tax classification hearing, where the councilors are expected to vote to maintain a single-tax rate for the city.