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Date: 12/14/2023
LONGMEADOW — At a joint meeting of the Longmeadow Select Board, School Committee and Finance Committee on Dec. 4, Finance Director Ian Coddington laid out the revenue and expenses of the town for fiscal year 2024, revealing a $717,601 deficit.
First, Coddington went over the funding available to the town. A full 2.5% increase of the FY23 levy limit of $54.7 million was approved by the Finance Committee, allowing the town to raise an additional $1.4 million. Additionally, Coddington estimated that state aid for Longmeadow would increase by $343,836.
Property sales from Jan. 1, 2022, to Dec. 31, 2022, are used to calculate new growth, which was $282,480 — 14.64% over the previous calendar year. Residential property renovations, additions and new construction comprise nearly half of the growth, said Ken Rodgers, president of KRT Appraisal, a property appraisal company with whom the town was contracted.
After adding the 2.5% increase and new growth, as well as a $5.98 million debt exclusion, to the FY23 levy limit, the maximum levy for FY24 is $62.35 million, with an actual property levy of $62.32 million.
Just as the town’s revenue has increased, however, so have its expenses. There are contractually obligated salary increases of $1.34 million and the budget will allow for $73,000 in department expense increases. Coddington said the town “will have to prioritize” where to spend that money. He pointed out that employee and retirement benefits are the largest use of the general fund and will increase by $1.36 million for FY24, while the capital contribution will go up by $64,519. The $2.84 million of additional costs outweighs the $2.13 million in additional revenue and leaves Longmeadow with a deficit.
Coddington reassured everyone that deficits are normal at the beginning of the budget cycle and the leadership team will work to balance it before the budget is finalized.
Select Board Chair Thomas Lachiusa asked why the town’s liability has increased by 7.5%.
Coddington explained, “It’s becoming more and more expensive to insure,” and “people are becoming more and more litigious.”
Select Board member Mark Gold commented that there was “not a lot of leeway” in the expenses, as many of them are contractually obligated. Instead, he floated the idea of cutting down the nearly $700,000 set to be added to the town’s other post-employment benefits fund, which covers certain retiree benefits, such as health care. Finance Committee member Erica Weida remarked, “At some point, if we don’t fund it, people still have to get paid.”
Select Board member Josh Levine commented, “We have to think of the long term. I don’t want to cut [services], but I don’t want to dump [other post-employment benefits] on future generations.”
Rodgers broke down the calculations for the FY24 tax rate. When determining a tax rate, municipalities divide the actual property levy by the total property valuation in the municipality, and then multiply that number by a factor of 1,000. This brings the FY24 tax rate to $20.68 per $1,000 of property value, a decrease of 9.77% from FY23.
Coddington estimated that with the decrease in the FY24 tax rate, Longmeadow is not in danger of hitting the tax ceiling of $25 per $1,000 of property value for “at least 10 years period.”
Rodgers walked the board through the town’s FY24 tax classification options. Each year the Select Board must choose whether to set a single tax rate for all property in town, whether residential, or commercial, industrial and personal. If a split tax rate is adopted, homeowners would save on their yearly tax bill, while the owners of other types of property would absorb that burden. With a maximum split tax rate, Rodgers said residential property owners would save an average of $342 dollars per year, while commercial, industrial and personal property owners would see their bills increase by an average of $18,154 per year.
Some municipalities adopt exemptions that further shift the tax burden from owner-occupied homes to non-owner-occupied homes, and from properties housing small businesses to those with a valuation of more than $1 million per year. Rodgers said none of these tax burden shifts would benefit Longmeadow.
Reviewing the data provided, Levine asked why commercial property values have increased dramatically. Rodgers said that the rental income of commercial properties is used as a stand in when certifying valuations. Since the last valuation audit, rent has increased from an average of about $20 per square foot to about $30 per square foot.
Gold said he has long believed the commercial properties in Longmeadow are undervalued and argued for the adoption of a split tax rate. He said the increase in residential property values has far outpaced the increase in commercial property values because rental rates are relied upon in place of regular sales turnover on those properties. Assessments are up 21.6% this year compared to residential values, which are up 14.8% this year. He “commended” Rodgers and the Board of Assessors for “starting to get the message.”
As an example of the undervaluation of commercial property Gold sees in town, he pointed out that the Longmeadow Shops had an assessed value of $20.2 million but sold the previous week for $30.4 million, a 50% difference.
Rodgers noted it may not be every commercial property that is undervalued by their assessments. Levine noted that a 50% shift on commercial properties would add $38,534 to tax bills and businesses and tenants in those spaces would feel the brunt. “That could kill a business,” he said, while the reduction to the residential tax bill would be “almost symbolic.”
Gold urged the adoption of a 1% tax split each year, which would be less harmful to businesses, but Select Board member Vineeth Hemavathi agreed with Levine that the benefit to homeowners does not outweigh the impact on small businesses. Select Board member Dan Zwirko said there was not enough commercial property in town to have the impact Gold was seeking. Lachiusa said he was optimistic commercial property assessments would increase and agreed to support a single tax rate.
Weida weighed in and said the tax rate of $20.68 per thousand is low compared to three years ago, when it was $24.60 per thousand, just below the legally allowed tax ceiling.
The board decided to pass a single tax rate with no exemptions on a 4-1 vote with only Gold dissenting.