WELLFLEET — At the upcoming April town meeting, voters will be asked to approve a Proposition 2½ override of $750,000 to fund last year’s budget shortfalls and maintain town services at current levels.
The fiscal 2023 budget presented to the select board on Jan. 18 showed a deficit of $2.1 million. Interim Town Administrator Charlie Sumner said that number is likely to decrease as the budget is refined.
Sumner also reported that last fall’s juggling of revenues to allow the town to set its tax rate had an unexpected side effect: new funds from cannabis sales and short-term rental taxes would not be available to fund housing and other initiatives.
The projected deficit reflects shortfalls of $729,949 in the operating budget and $1,432,700 in the capital budget.
“We will determine what’s reasonable to present to voters,” Sumner told the Independent. “The selectmen might say a fire truck replacement or building repair can wait until next year.”
Proposition 2½ limits towns’ ability to increase their overall property tax levy from one year to the next. In 2021, Wellfleet’s override was for $168,000, which, Sumner noted, was not for operational needs.
Overrides passed at Wellfleet’s last three annual town meetings allowed the town to add firefighters, EMTs, and paramedics. “We’ve been transitioning over several years to a more traditional full-time fire dept., so each year we’ve been adding personnel,” Sumner said.
This year, both fire and police will be requesting overrides for two new hires each, for a total of close to $400,000.
To fund everyday services — the operating budget — during last year’s financial bind, the town opted to use reserves, including money from the stabilization fund, the ambulance fund, and surplus revenues from other areas of the budget.
“Those only last for one year,” Sumner said, “but you still have the programing that goes on beyond that.” The stabilization fund has been drained of $639,000 since June, he said, a situation that “is not sustainable.”
For the town to maintain its AAA bond rating, the stabilization fund must be replenished as soon as free cash is certified by the state, Sumner told the select board. But free cash cannot be certified until the books for fiscal 2020 and 2021 are balanced. The effort to untangle what the town’s accounting team has called “the ball of yarn” of town accounts has been ongoing since last August.
“We thought we would be done right now, but Lisa is doing two jobs and Mary is doing two jobs, so we’re behind,” Sumner said. Accountant Mary McIsaac took on the role of town treasurer after former Treasurer Miriam Spencer resigned on Nov. 30, and accountant Lisa Souve is filling in for Assistant Town Accountant Jane Tesson, who has been on extended leave since Oct. 1. “We are still trying to get it done by the end of January,” Sumner said.
Local receipts from new cannabis revenues and the tax on short-term rentals will not be available for use by various town departments and housing advocacy groups, as had been previously thought.
“We’re in a really difficult situation because those monies are committed,” Sumner said during the select board meeting.
To set the tax rate in November, the state Dept of Revenue (DOR) worked with the town on a “Plan B” to make up for a $546,000 deficit in the fiscal 2022 budget. A special town meeting planned for December to authorize more spending had to be abandoned because the town’s free cash account had not been certified.
“Plan B” included reducing the town’s overlay account (money appropriated to cover errors in residents’ tax bills) from $150,000 to $50,000. Left with a $446,000 deficit, Sumner and the DOR representatives decided that some of it could be covered by increasing estimated receipts in several categories, including fees, licenses, motor vehicle excise tax, boat excise tax, room occupancy tax, meals tax, and cannabis sales. The receipts estimate was raised from $2,365,000 to $2,800,000, Sumner said. “We stretched it to the absolute maximum,” he said.
The town “ran into a wall on the local receipts side, so we had to increase the use of local receipts just to set the tax rate for the budget that was used last June,” Sumner told the select board. “At that time, we had two alternatives. We could go back to town meeting in January or February and try to cut the town budget, or just use local receipts. That’s what we did.”
Despite competing demands for the cannabis and rental tax revenues, the decision to use those funds to balance the budget limits the options for using those new revenue streams going forward, Sumner said. For example, it stalls the select board’s endorsement of earmarking 80 percent of the revenue from the short-term rental tax to the town’s new affordable housing trust fund.
“If we’re going to talk about reallocating some of those monies for some other purposes like housing, we’re going to have to peel away local receipts over a period of time by either cutting spending or finding another stream of revenue,” Sumner said.
Sumner suggested a thorough review of fees and charges should be initiated on all levels.
“This should include water and marina, which are subsidized by the property tax levy at the current time,” he said. “We really need to review these two enterprise funds to properly include property and overhead costs,” he noted in his report to the select board. “The ideal situation would be to develop a multi-year plan to increase revenues in an attempt to reduce the burden on the general tax levy.”