Why Put Our Own Back Against The Wall?

Amesbury is one of the few communities in the Commonwealth that does NOT levy property tax up to its allowed limit under Proposition 2 1/2. In 2007, 75% of the communities in the Commonwealth taxed at 99-100% of their allowable amount (according to the MA Municipal Association). It is especially notable that we're not taxing at our limit, given the dramatic reductions in State Aid (we lost 25% or $3,000,000 in Aid since 2000) (DOR website). We could speculate on the reasons why we have not had to tax to our limit despite this lose of revenue (e.g. good financial management, tax base growth) but that's another discussion.

Recent Boston Globe articles (in their 'Override Central' section) have chronicled the woes of communities jammed up against their levy limit. It's a depressing litany--closed school libraries, laid off teachers and public safety personnel, increased school fees, closed sports programs, closed senior centers, not replacing safety equipment. Compounding the problem of being up against the levy limit is that the vast majority of override votes fail (2/3 of them failed in 2006). Councilor McClure and Mayoral Candidate Alison Lindstrom have both said that we can always reverse the underride if we want but the facts contradict this assumption--it would be very difficult to undo this step, once taken.

Having excess levy has two enormous benefits for Amesbury. First and foremost, it buys us flexibility, the ability to respond to unforeseen or uncontrollable cost increases (think 'flood' or 'special education') without having to call for an override to do it. Second, it actually saves us money. If we wipe out our excess levy (which a $1M underride will do), we can count on having our bond rating go down. This is like having your credit rating go down. As Council Candidate Allen Neale has pointed out, a lower bond rating will increase the amount that we spend on bond interest, potentially costing us $100,000's a year in wasted interest payments.

In talking about the underride around town, I've used this basic analogy to personal finances. If you looked at your personal budget and thought "Gee, I need to cut my costs and save some money," would the first thing that you did be to go to your boss and ask if you could get a pay cut, please? No, you would first ask yourself "what can I cut from my expenses? and then "how much salary do I need to cover my costs (mortgage, heat, auto, etc)?" The current Council has asked "what can we cut" and only found 2 line items worth $52,000 to cut. Lowering our income (tax revenue) is meaningless without first asking what it actually costs us to deliver the services that we need to ourselves. It's terrible financial management.

So let's do ourselves a favor and approach our financial situation with common sense and prudence, keeping the hard-earned flexibility and good bond rating that we currently enjoy. We should be excited to have 'excess levy' room---it prevents us from being jammed against the wall.