The best estimates of the economic road ahead foresee modest national growth for the next few years. The housing market, which has suffered badly here, though not as badly as in some other parts of the country, is overstocked and undervalued, and the prospects for demand to overtake supply in the near term are dim. That’s especially true here.
Add to this the imminent changes in mortgage lending rules — much higher down payments, much stricter underwriting, far higher hurdles to securitization of mortgage loans — and the housing boom we wallowed delightedly in since the 1970s won’t be repeating itself anytime soon. Far healthier of course, as any right-thinking economist or government regulator will tell you, but tough on small towns whose real estate industry is the largest segment of their economic good health.
As Steve Myrick explained in a news story last week, town governments struggling to maintain town services while holding the line on real estate taxes, are hard pressed. Steve’s review of the problem focused on the three large, down-Island towns with large public employee rolls — 177 full-time workers in FY 2010 in Edgartown, 179 in FY 2010 in Tisbury, and 220 in FY 2010 in Oak Bluffs — and budgets that range from $20 million in FY 2011 in Tisbury to $25 million in FY 2011 in Oak Bluffs to $27 million in FY 2011 in Edgartown.
As Steve put it, “Across Martha’s Vineyard, selectmen, finance and advisory committee members, and town administrators express a familiar lament: They say rising employee costs, especially health care and retirement benefits, far outpace their town’s revenue, even in good economic times. At annual town meetings this week, most voters will see higher operating budgets and override questions that will mean higher taxes.” And these are hardly good economic times.
“Those high school and pension costs and health care costs keep going up at five, ten, fifteen percent crunches every year,” Oak Bluffs town administrator Michael Dutton told Steve. “If your policy is you’re not going to have an override, you’re chipping away at services. After 10 years of these kinds of costs and minimal overrides, we’re at a break point.”
What’s a town to do?
The implication of Mr. Dutton’s comment was that the tight pinch might be eased if voters would only agree to Proposition 2.5 override requests. But, voters have been relentlessly hostile to override requests because they understand that approval of these requests will mean higher taxes this year and a higher spending base next year on which to build a new, larger budget with a consequent increased tax bite. (Incidentally, spending in the form of debt exclusions, say, for a capital acquisition such as a new fire truck, does not add to the budget base. It is excluded. And consequently, such expenditures do not enlarge the pot to which the two and a half percent limit on tax levy increases applies.)
If you leave out of this description the taxpayers and their ability to nix budget increases, you have the Steamship Authority, which can spend more each year and charge more in fares, and too bad for us and our cost of living. So, the spiral whirls onward and upward, at least in terms of what travelers pay. Because most of the travelers are visitors, we grumble but do not become ornery. Because nearly half of every real estate tax dollar comes from seasonal property owners who don’t ask for much and don’t vote, we tend to open the purse a little wider than we would if we taxpaying, year-round, voting residents had to foot the whole bill.
There ought to be three steps to building a town budget, but generally the first step gets left out. We start with Step Two. Step Two is pricing all the ways in which money will be spent; usually we just add a percent or two or three on top. Step Three is toting up the planned expenditures, agonizing briefly over the sum, then sending the bills to the taxpayers.
If there were a Step Four, it would be municipal officials shaking their heads wonderingly that the taxpayers haven’t stormed town hall and offed them all. But all that taxpayers have been able to muster is the energy to reject override requests.
The missing step, Step One, is the one where smart town leaders, knowing that annual fiscal calamity stretches onward as far as the eye can see, enlist the help of smart, thoughtful townsfolk and some independent, expert advisors to reconsider the budget in all its essential parts.
What are the services we must provide? What are the services we’d like to provide? What are the jobs the town government must do to make its billing, spending, and accounting precise and rich in data to be used for next year’s budget? What are the services we must curtail or suspend because we deem other services — education for instance, and police, and snow removal, etc. — indispensible? What are the services we now provide with our own employees, who naturally expect good pay, plus benefits (which are killing us and will kill us for years beyond their working years when they retire, but which we might contract for with private suppliers)?
In other words, Step One, especially in a time of unrelieved stress like this, is to reassess, with the help of residents, the entire collection of duties the town discharges and to devote more funds to those which need more funds and less to those that ought to get less.
As Steve’s reporting last week showed, between 2006 and 2011, when assets of all sorts, and particularly real estate on which our economic life depends so heavily, declined in value and the cost of living reversed its annual ascent, municipal budgets increased — 22 percent in Edgartown, a rich town that can afford to spend like Donald Trump, but probably shouldn’t; 26 percent in Tisbury, whose budget is the smallest of the three but whose employee costs are highest as a percentage of the annual budget; and 10 percent in Oak Bluffs, which has the largest municipal workforce and the town that has had the mightiest fiscal struggle, with more discomfort to come.
Time to give Step One a try.