WELLFLEET — After telling the select board on Nov. 2 that property tax bills could not go out this fall, interim Town Administrator Charles Sumner returned a week later with much better news. The team dispatched by the state Dept. of Revenue (DOR) had come up with a work-around that would allow the tax rate to be set and the bills to be mailed.
Sure enough, Sumner confirmed this week that the fiscal 2022 residential tax rate had been set at $7.78 per thousand and that fall tax bills would likely be sent out on Nov. 18 and due on Dec. 20. The tax rate for fiscal 2021 was $7.86.
The town is not completely out of the financial briar patch yet.
Sumner said he is working with Town Treasurer Miriam Spencer on a cash flow analysis to know whether short-term borrowing will be necessary to pay the town’s bills in between the time tax bills are sent and the payments start to come in.
“We really have to take a look at our cash flow,” he told the Independent. “Do we have enough money to pay our bills until people can pay their property tax bills? If we don’t, then we’ll do a temporary borrowing.” He said he would know if that was the case by the end of this week.
“I think we’re going to be fine, but it’s just the prudent thing to do,” Sumner said.
The DOR team spent the first week of November working with Sumner and two temporary accountants to come up with a solution to the town’s most immediate problem: the annual town meeting last June 30 spent $546,000 more than the town’s projected income for the current fiscal year. Towns are required to balance their budgets.
Sumner originally thought the only way around the cash crunch would be via a special town meeting, but such a meeting couldn’t happen until January, when he expects the state to certify the town’s free cash account. Free cash can’t be certified until the town closes the books on fiscal 2020 and fiscal 2021, which is what interim town accountants Lisa Souve and Mary McIsaac are working on. They are going back to July 1, 2019 and reviewing every transaction, correcting errors and omissions.
“They’re in the trenches, doing God’s work, shall we say,” Sumner told the select board.
Waiting until a January town meeting would have required making substantial budget cuts.
“Cutting more than half a million dollars out of Wellfleet’s operational budget when half the year is gone would be a devastating event,” Sumner said during the select board’s Nov. 9 meeting. He added that there were, however, “opportunities to reduce spending without impacting programming and people.”
That’s because the DOR team hit upon “Plan B.”
Plan B From DOR
“The state was really the architect behind Plan B,” Sumner said. “After the Dept. of Revenue met with us, they came up with the alternative.”
The first recommendation was to reduce the town’s overlay account by $100,000. Every town in Massachusetts appropriates a sum of money to cover errors in residents’ tax bills.
“We’re doing thousands of properties and we make mistakes,” Sumner said. “Citizens come in and say their property wasn’t assessed accurately. They file for an abatement and we have to pay for that lost tax revenue. That’s what overlay is for.”
The town originally budgeted $150,000 for overlay, but the DOR thought that could be cut to $50,000.
That left a $446,000 deficit in the budget, and the DOR decided some of that could be covered by increasing the estimated receipts in a host of categories, including fees, licenses, motor vehicle excise tax, boat excise tax, room occupancy tax, meals tax.
The town’s original estimated receipt total was $2,365,000.
“But the state said, looking at our receipts, that we can increase that to $2,500,000,” Sumner said. “We used to try to be conservative with that, but the state said we could use a little more money out of that area. That’s helped a lot.”
Another increased estimate was in projected receipts from cannabis sales. That number went up to $270,000. “Usually, before the state lets you use a revenue stream for operational costs, they want to see a full year of operations,” said Sumner. “However, in this situation, the DOR said the cannabis community impact fee appears to be a solid revenue stream that will come in.”
The last $41,000 came from an increase in estimated receipts from the rooms occupancy and short-term rental tax.
“I’m pretty confident those revenues are going to increase by a large degree,” Sumner said. To close the remaining gap, the DOR allowed the town to increase that number “because they’re confident that, in fact, we will collect that money,” he said.
Sumner expects the fiscal 2020 and 2021 books to be closed by the end of December, and free cash to be certified by January. “It’s going to be Lisa’s, Mary’s, and my Christmas present,” Sumner said. A draft budget and warrant will be presented to the finance committee and select board by the holidays.
The DOR team returned this week to help Sumner put together a financial forecast.
“It’s taking a look at the next five years and to see what our fiscal condition is,” Sumner said. “That’s critically important as we work on the budget for 2023.” Sumner suspects that a budget override will be needed. “We need more taxing authority from residents if we want to maintain a staffing program as we know it today.”
The town auditors from Powers & Sullivan are expected on December 13 to start the fiscal 2021 audit. Powers & Sullivan has been doing the town audits for more than 20 years.
Sumner admitted that the DOR’s Div. of Local Services recommends changing audit firms every five or six years.
But the top priorities right now are to untangle the books and hire a new town accountant and a new town administrator.
“We wanted to improve the town’s capacity and condition so that it would be attractive for someone to come in and take over,” Sumner said. “Why should they have to deal with problems of this magnitude?”