Heath stands at a financial crossroads. Our historic hilltown faces an unprecedented financial challenge that will escalate over the next few years. With busy, stressful lives, it can be hard to focus on problems that unfold over time. But we must focus and act now to ensure a viable financial future for Heath. Decisions we make at our May 8 Annual Town Meeting will affect Heath’s financial health for years to come.
This challenge has been 40 years in the making. In 1980, Massachusetts passed Proposition 2½, capping property tax rates at $25 per $1,000 of a town’s assessed valuation. Currently, at $22.52, Heath has the seventh highest tax rate of 351 Massachusetts municipalities. Our taxes have risen steadily over the years. We are getting perilously close to the $25 ceiling.
What will happen when Heath hits the $25 ceiling?
Costs will keep rising, but the Town’s taxing capacity will be capped. Heath could be forced to live on a fixed income.
Here is why: Ninety percent of the Town’s operating budget comes from property taxes. Once Heath’s tax rate reaches $25, our tax revenue can only increase if the Town’s total assessed value increases. We cannot gamble on that. At $94M, Heath’s total valuation is the same today as it was in 2010. By law, Heath’s property values are updated annually.
Adding to the problem, we have little immediate control over 60 percent of Heath’s operating costs, which include non-discretionary costs like education, employee benefits, and debt repayment that the Town is legally obligated to pay. Not only do non-discretionary financial obligations make up 60 percent of our budget, but they are also growing faster than discretionary salaries and services. That leaves only 40 percent of our budget for discretionary spending such as highway maintenance, administration, fire, police, library and public health, which we are not obligated to pay.
What does this mean for Heath’s future? When Heath’s tax rate reaches $25, flat tax revenue could force us to cut spending year after year as costs continue to rise. Over time, faster growing non-discretionary obligations, which we cannot easily control, will squeeze out discretionary costs that we can control.
Imagine a pie where non-discretionary obligations take a larger bite each year, leaving less and less for discretionary salaries and services.
Can we do anything to avoid this future? Yes! Working together we must immediately begin trimming and restructuring Heath’s operating budget to maintain a prudent cushion between Heath’s current tax rate and the $25 cap. A cushion of unused taxing capacity will give Heath financial flexibility to respond effectively to unforeseen events and emergencies. When we see an accident ahead on the highway, we apply the brakes immediately rather than waiting until the last minute. Heath must do the same.
First, we must accept responsibility. Nothing is coming to save us. State and federal governments are stretched thin due to the pandemic. They may provide some one-time funds, but our budget challenges are ongoing and long-term. We cannot gamble on rising property values saving us. Assessments are based on fair market value, which we don’t control. And revisions to Proposition 2½ will not save us. Ninety-eight percent of Massachusetts towns have tax rates lower than Heath’s. There is not pressure to change the law. (The only way to exceed the $25 ceiling is passing a capital debt exclusion, as Heath did for Broadband.)
Second, we must face reality. If we ignore the looming tax rate ceiling, we will crash into it and be forced to make painful last-minute cuts in salaries and services. Denying this problem will not make it go away. We must act now to reduce and restructure both discretionary and non-discretionary costs in order to maintain a prudent cushion between Heath’s tax rate and the $25 cap. We must all be part of the solution: Be informed. Attend board meetings. Come to the Annual Town Meeting. Ask questions. Offer suggestions. Let your voice be heard.
Finally, we must recognize the difference between needs and wants. Saying yes to some expenses will mean saying no to others. We may dream of and wish for things we want, but what do we really need? If we are unable to tell the difference, we will squander our resources on wants while neglecting the Town’s real needs.
Maintaining a prudent cushion below the $25 ceiling requires making tradeoffs, starting now. Heath cannot afford it all. Working together we must be resourceful, realistic, and thrifty like our Yankee ancestors. Heath’s financial future depends on it.
For a complete report email jgran@crocker.com.
Jean Gran is a retired financial analyst and former Heath Finance Committee Member. William Gran is a retired Greenfield director of planning and development, Heath Planning Board member, and former Finance Committee member.