Town’s Three Boards Meet to Discuss “What Ifs” of Possible Budget Storm & Taxes
Monday night, the members of Wilton’s three main municipal Boards–Selectmen, Education and Finance–got together for a tri-board meeting to plan for the threat of a possible budget storm. At issue is that legislative decisions being made in Hartford may translate to additional sharp increases in expenses for the town–but town officials won’t know whether those legislative measures will be enacted until after Wilton finishes the annual process of setting the FY2020 budget in May.
That means if Wilton approves the budget in May, and legislators decide in June to pass along more costs to the town (e.g. teacher pension contribution) or reduce the town’s revenue sources (e.g. the municipal car tax becomes a state car tax), Wilton will be in a pickle. What really complicates things is that the Town Charter doesn’t allow for going back to the budget and cutting expenses and spending once the town approves the budget.
What’s more, not all of the 20 or so town officials sitting around the table agreed at how to approach the issue–or whether the proposals in Hartford were even likely to materialize and have impact. Were they ‘rumors’ or ‘speculation’ as some felt? Or were they more concrete moves–and therefore more realistic threats–than others had ever seen during their time on the boards?
First Selectwoman Lynne Vanderslice, who called the meeting together, set the stage the task at hand: “It’s really a planning exercise based on certain dollar [values] with negative impact–what do you do?”
Making matters worse, she said: not only are concerns stemming from what’s happening at the state level, but also what’s happening municipally, and it’s not a pretty picture. It’s pretty much a sure thing that many Wilton residents will be paying more in taxes, regardless of what happens in Hartford, thanks to Wilton’s recent real estate revaluation.
“It’s important for everybody to know that almost half the voters are looking at good sized tax increases, not the decreases that others will see because their home [values] went down,” Vanderslice said. Here’s why:
- Overall, the Residential Grand List value (the total value of ALL residential property in town) decreased 4.08%. Moreover, the values were based on the real estate market of Oct. 1, 2017.
- In comparison, the grand lists of Weston and New Canaan had even sharper declines–6.3% and 7.1%, respectively–and were valued based on the market of Oct. 1, 2018–which is ominous for Wilton: it most likely means true current values for Wilton in 2018 are also even lower than what 2017 values show, reflecting the downward trend in the current real estate market.
- Even though the Residential Grand List is down 4.08%, just over 2,500 single family homes, or 47%, are up in value. “For sure, no matter what the mill rate ends up, unless we have a decrease, they are going to see an increase in their taxes.” Based on the numbers Vanderslice provided to GOOD Morning Wilton before the meeting, those residents will see marked increases in their taxes (depending on tax appeals):
- 890 residents will see tax increases of 2.6%-5%
- 850 will see tax increases of 5.1%-7.7%
- 570 will see tax increases of 7.7%-12.7%
- 190 will see tax increases of 13% or more
- Of the 543 residential condos in town, 380 of them (70%) have also increased in value, and their owners will see significant tax increases
- 60 will see tax increases of 5.24%-7.67%
- 170 will see tax increases of 7.72%-17.91%
- 125 will see a tax increase over 18%
Despite the Town Charter not providing for ways to cut expenses after a budget is passed, Vanderslice said the only option is to increase funding, if necessary.
- Every budget has a 1.0% contingency, set aside for just such an occasion when the state passes along unexpected costs. For FY2020, that 1.0% contingency is $1.27 million; up to 25% of that can be used by the BOS without additional approval, and the rest can be spent with BOF approval.
- The estimated June 30, 2019 excess fund balance (above the Moody’s required 10%) is $3.21 million. Of that amount, $2.71 million is already being utilized in the FY2020 proposed budget to help reduce the mil rate. That leaves $500,000 extra in fund balance that still could be used. [Of note, BOF chair Jeffrey Rutishauser pointed out that because there are limits on what can be drawn down on the fund balance, it wouldn’t be accessible until next year.]
- The Town Charter allows the BOS and/or the BOE to ask the BOF for more funds from the General Fund. The BOF can authorize additional funds but it can’t exceed 1.0% of the budget for each–or 2% total of the overall FY2020 budget. BUT to do that, there has to be a Special Town Meeting and a majority of voters has to approve any appropriation endorsed by the BOF. If the BOF won’t authorize additional funds, the BOS can still call a Special Town Meeting but now at least 15% of the voters must be present and vote, for any majority vote to approve.
- The BOF can levy an additional tax against the grand list equal to the amount of money needed for that year without approval via a special town meeting.
‘What If’ vs. ‘Wait and See’
The discussion then began on what to do if the state passed along any expenses that were greater than the $1.27 million contingency that’s already in the budget. Rutishauser prioritized the options as he saw them: once the contingency option was exercised, then going to a Special Town Meeting followed by a tax increase “as a last resort to close a gap.”
BOF member Peter Balderston said that there might be places to look for available funds on reserve in the existing budgets. “We should probably suck those up,” he suggested. He zeroed in on what he said he found was an excess balance in the BOE budget associated with Continuing Education.
“Going back to 2012, that appears to have just accumulated over the years. I think it would be remiss of us to ask the town to pony up more taxes when we have what appears to be–I could be wrong–available fund balances to defray some increases,” Balderston said, adding, “There are other special revenue funds within the BOE. Again, I don’t understand all of their purposes, but again, we’re having to dig deep here. This is a challenging time–even if we do nothing, we have some pretty heavy tax increases on the town.”
Vanderslice said she was concerned about residents whose pocketbooks will already take a hit–and the need to potentially pre-empt having them hit again.
“For people [with homes] in the lower end of the price range, everything below the mid-$700,000s. If you’re paying the average amount of tax, $12,000 taxes, a 10-20% increase is a sizable increase. That’s what’s worried me about this whole revaluation is that it’s very disproportionate. It’s not what we typically see. You have a clear split in the community between going down and going up.”
Selectwoman Deb McFadden, who volunteered that her own property taxes will likely jump significantly, still was cautious about over-anticipating what hasn’t yet happened from Hartford. She said, “to think what to do when and if it happens” is ok, but not to necessarily act on it yet.
“I truly believe we shouldn’t do anything proactive now. We really don’t know what’s going to happen–all we have is speculation, and as we know things in Hartford shift rapidly. We don’t know what’s going to happen. There are multiple bills that can have an impact in variety of ways for a variety of amounts,” McFadden suggested, adding, “Since we don’t honestly know what that might be, I think we need to wait and see and not create a pot of money on speculation of what may or may not happen. Residents will be very upset if we have a pot of money sitting around and it doesn’t end up getting used and they’ll say, ‘Why did you raise my taxes for this purpose when they’re already going up because of the assessment and other circumstances?’ We need to think of this first.”
She also said she doubted that the state politicians want to throw all 169 CT municipalities into financial chaos by pushing down significant costs. “I think Hartford would be hard-pressed to do as much as they’re talking about at the moment.”
Balderston disagreed, saying in the three years he’s served on the BOF, he’s seen the state government slowly chip away at municipal resources, but what’s being proposed in Hartford this year is significantly different.
“This is the first year that I’ve been on the board that the magnitude of what is being proposed borders on catastrophic for this town, and I imagine for a lot of other towns. I don’t disagree that we shouldn’t bank a lot of money just for the sake of being prepared, but I do think we should be looking at free fund balances as a first order line of protection. But also thinking about what is the likelihood that we’re going to be hit with something,” he said. “I think we’re facing something that is really out of our control, and being able to manage through and be prepared for it is the best course of action.”
Vanderslice responded to the “pot of money” idea by saying she didn’t think any of the members of the boards wanted to do something like that.
Bd. of Education chair Christine Finkelstein was intent on safeguarding her budget–and that contrary to what the BOF’s Balderston suggested, there were no excess funds just lying around.
“Regardless of what happens in Hartford, here in Wilton the schools will always be the crown jewels of the community, and they need to be protected. We submitted a lean budget, that came in below guidance. And the guidance was set knowing the teacher pension was likely going to end up in our laps,” she said, adding that this year’s budget is the fifth consecutive lean one, leaving very little room to cut.
“If we’re going to start talking about the need to cut hundreds of thousands or even millions of dollars, then we’re talking catastrophic, programmatic cuts. We’re talking the heart of the school system,” Finkelstein warned, reminding the other officials that over 80% of people who answered the BOF survey said they moved to Wilton for the schools.
“And that they’re willing to fund the schools. They understand the need to do so,” she added. “We need to be very careful not to mess around with the school system.”
Finkelstein also said there was no guarantee what might come down from Hartford. “We don’t know. Nothing could happen or something horrible could happen.”
But Rutishauser, who has served on the BOF during previous terms, said in his experience, he’s never seen Hartford so specific about the kinds of suggestions for generating revenue–which could come at the expense of municipalities.
“I’ve never seen that before. I’m taking it more seriously because of the degree of specificity and the fact of the last election, there was talk about, ‘We’re going to raise revenue–tolls, extra sales tax. This is just another revenue-raising avenue. That gives me more concern, it’s not going to be ‘wait until next year.'”
Rutishauser referred to SB 431, An Act Concerning Property Tax Reform, as one of those very specific pieces of legislation that concerns him.
The bill is one that also worries Vanderslice, because she says it proposes several measures that opponents say will hit Wilton very hard, including: a repeal of the municipal car tax–estimated by Vanderslice to be a $6 million hit to Wilton; a $50,000 homestead exemption that would result in an estimated $7 million-plus loss to the town; and a statewide car tax that would redistribute funds to municipalities–but which Vanderslice estimates won’t be sent Wilton’s way.
John Kalamarides, a Democratic member of the Board of Finance, said he did some “back-channel” investigating, specifically SB 431, which was proposed by fellow Democratic Senator Martin Looney.
According to Kalamarides, SB 431 isn’t a likely threat. He says his sources aren’t worried about it, including Wilton’s State Sen. Will Haskell, who said that when the measure had been proposed in previous years it had gotten “no traction.” Other local Democrats, said Kalamarides, assured him that SB 431 won’t pass. “Absolutely not. If it did, absolute devastation, and they won’t do that.”
He also said he’d had lengthy conversations with Looney himself, as well as state senate president Sen. Bob Duff, and other members of the State Assembly Finance Committee. “They say there’s literally no chance. There’s certainly not going to be this year a threat.”
What to Do and How to Communicate to Residents
The board members discussed what possible courses of action to take–should potential areas to cut in the budget be identified? Should some amount be identified for cutting with the remainder to be taxed if necessary? And how do these thoughts get communicated to a population that is relatively unengaged–given low resident turnout through the budget process thus far?
Balderston was eager to start to try to identify where potential pools of funding could be found in both the town and school budgets.
“If we’re trying not to raise taxes, we want to share the burden of an increase between the BOS, BOE and the taxpayer; without that you’re going to essentially be laying that all out onto the taxpayer.”
Rutishauser said there’s precedent for a similar situation that occurred with a budget shortfall in 2001–all three boards came together to find savings at the time. He said it’s possible to present the town residents with a choice.
“Whether we go to the town for authorization for the 2%, to say, that 2% is going to be added to the tax you’re going to pay anyway to close the gap. It’s better to take 2% off the balance sheet [now], we’ll support that because you won’t raise taxes, and the rest, the balance, would potentially be a tax increase. That the message, an either/or, pick your poison. But I think they’d rather take it off the balance sheet than say no and it gets added as a tax increase that everyone takes as a mill rate increase.”
McFadden said not knowing what might possibly be enacted in Hartford or how much cost the town may or may not incur as a result makes the message complicated. “Communicating the message effectively about being proactive on something that is complicated is perhaps not a wise choice. Perhaps we wait, see what really happens and maybe have a Special Town Meeting instead of being proactive in our May Town Meeting.”
Vanderslice disagreed, saying it’s a matter of transparency.
“One reason we’re having this meeting now is that we’re upfront; part of this process is informing the public,” she countered. “We have a highly educated public, just because they don’t come to the meeting doesn’t mean they’re not aware. I hear everywhere I go people talk to me about it. Even if they don’t come to the meeting people know what’s happening. You have to tell people this.”
McFadden said, “There’s a difference between communicating the information and taking a proactive step at this point.”
The debate continued.
Balderston said it was important to say that what level of impact Hartford might have was unknown, but to make it clear what steps would happen if there was an impact: “If we get to those points, we’re going to have to go through a sharing of burden, but at least people understand the concept of how we’re going to operate.”
Selectman Josh Cole put it bluntly: “I think people need to be given a ‘worst case scenario.’ People should know. I don’t want to be in a position where you get a supplemental tax bill for $7,000… $8,000… $10,000 that you’re not expecting. we owe it to people to put all the cards on the table, say, ‘This is how bad it could be, we hope it doesn’t get this bad but we want you to know this is what we’re going to do. We hope it’s much less. People need to have that information.”
BOF member Ceci Maher felt differently. “There’s so much ‘sky is falling’ going on. ‘Taxes are up; assessments are up; everything is terrible.’ We have to be careful. It’s very much in the tone of leadership. We have to be careful how we talk about what’s happening. Rather than people think, ‘Oh dear god, I have to sell my house,’ we need to have people coalesce around the town. While we’re talking about it, let’s do it in a way that’s positive and affirming so people don’t get scared.”
Maher was critical of GOOD Morning Wilton‘s article on Monday in advance of the tri-board meeting, with the words, “$14 Million Bomb,” in the headline.
“‘This is the worst case that’s coming.’ It’s scary. While I do agree we have very intelligent people in town, people are not as focused, and when we’re in an echo chamber, then it seems like everyone knows. Not everyone knows.”
[Editor’s note: any references GMW has made to $14 million of potential impact to Wilton stem from information that has been provided during public discussions, including the Board of Finance’s slides at the budget public hearings last week.]
Vanderslice asked how Maher thought the message should be delivered to residents instead.
“Communicating it in a rational, calm way, with different scenarios, but not, ‘Oh my god, we’re being slammed by Hartford!’ because that ends up putting us in a terrible position,” Maher responded.
She also warned against “attacking” the school budget.
“The BOF survey and the Hands Off Our Schools component shows how important the schools are to our town. We have to be incredibly careful with attacking our schools, especially when they come in under what the BOF recommended. We’ve seen the populace really care about the school.”
Her fellow BOF member Stewart Koenigsberg disagreed with the approach.
“It’s different this year. I don’t think we’re the ones creating bad news. We’re getting the bad news from Hartford–”
Maher interjected– “Rumors from Hartford.”
“I don’t think it’s rumors,” answered Koenigsberg.
“I think the bills that have been filed have made people very uneasy,” Vanderslice added. “Having been on the BOF for seven years and in this job for three, we just haven’t seen things like we have this year. The uneasiness people are feeling is justified. I think it’s unfair to call those things ‘rumors’ because those bills were filed.” She furthered her point by explaining what the governor is working on in relation to the pension costs she said are likely headed for municipalities. “That’s why I’m not as optimistic.”
McFadden countered that the conversation needs to be ‘elevated.’
“We need to be factual, honest, clear, transparent about our message, but we need to project it in a way that we’re positive for our real estate market, about tour schools, about our community. Because at the same time we’re facing a challenge from Hartford, we still want to elevate the conversation about Wilton. It’s a great place to live. We need to communicate a positive message about how we’re managed by our BOF, we’re able to address the situation. It needs to be a positive message. There’s multiple ways to communicate the message, we just want to make sure we’re really positive.”
BOE member Lory Rothstein said telling residents that the three boards are addressing the issues is a good idea.
“Some people are paying attention, some people are reading the headlines, and some people are neither. That’s why they elected all of us, to pay attention and know what’s going on. Let the community know the three town boards are paying attention, we are collectively following what’s going on in Hartford, we’re in close contact with all of our legislators who are keeping us informed; we have outlined steps to take to find the funding should we be hit with these expenses. And if there are expenses that go above and beyond, then collectively as three town boards, we’ll get together and we’ll find a way to address these issues, and rest assured that we’re working on this.”
Vanderslice ended by saying, “I think we have been positive. There are some facts that are not good facts, but they’re the facts. You present them. The fact that we know the facts, that we’re looking at all the data that’s available is a positive, and that we all came together and had this meeting.”
The next step is for the Board of Finance to start deliberating on the budgets they’ve been presented with, beginning tonight (7:30 p.m., Town Hall Room B). Over the next two nights they’ll determine whether they’ll ask the BOE and BOS to make cuts or whether they’ll bring the budgets as presented to the Annual Town Meeting on Tuesday, May 7.
The boards agreed that a press release would be issued, explaining the path as Vanderslice laid out and Rutishauser had reaffirmed, should any steps be necessary once the town budget setting process was over.