Missteps, late tax payments create budget deficit for Aquinnah

Voters will decide how to fix a $100,000 budget shortfall at special town meeting Wednesday night, January 7.

Aquinnah will hold a special town meeting January 7 to help plug a hole in the town budget. — Photo by Michael Cummo

A series of financial missteps, underestimates of revenue from fees, licenses, and fines, and late property tax payments combined to create a $101,564 budget deficit for Aquinnah in the current fiscal year, a shortfall town officials hope to resolve at a special town meeting on Wednesday, January 7. The deficit amounts to 2.6 percent of the town’s $3.8 million budget for the 2014 fiscal year that began July 1.

Voters will be asked to dip into the town’s stabilization fund or, as an alternative, enact a series of budget cuts in combination with a withdrawal from the stabilization fund, to balance the books. The special town meeting is scheduled to begin at 7 pm in Old Town Hall.

The first article on the warrant asks voters to withdraw the entire amount of the shortfall, $101,564, from the stabilization fund, which currently has a balance of $208,784.

The second article, offered as an alternative to the first measure, would withdraw $57,743 from the stabilization fund, and make up the rest of the deficit with $43,821 in budget cuts from town departments, including $11,578 from the police department, $7,114 from public works, $7,000 from the town’s budget for data processing, $4,000 from the fire department, and smaller cuts from nine other departments.

Approval by two-thirds of the voters present is required to withdraw funds from the stabilization account.

In an executive summary that accompanies the special town meeting warrant, Jim Newman, chairman of the board of selectmen, said the shortfall “will put the town in a position where it won’t be able to cover all its bills by the end of the fiscal year (June 30, 2015). When this was reported to the state Department of Revenue (DOR) as part of setting a tax rate for the rest of the fiscal year, they instructed the town to not send out its third quarter tax bills until the matter had been resolved.”

Town administrator Adam Wilson, who described the shortfall as a “perfect storm” of financial issues, said two articles will appear on the warrant, to give voters a choice.

“If the town voters agree to take the entire amount out of the stabilization fund, the problem is solved,” Mr. Wilson said. “If the town voters don’t want to do that, the second article asks voters to enact a series of budget cuts. I wanted them to see that the department heads took this seriously and dove back into their budgets.”

Financial misses

The financial problems came to light as the town worked with the DOR to compile its tax recapitulation statement, a requirement of all Massachusetts towns. That revealed tax payments to the town were coming in at less than the amount projected for the fiscal year 2015 budget.

“The DOR said our projected revenue from property taxes looked off,” Mr. Wilson said. “We simply didn’t have the same amount of property taxes coming we had in the previous year. As a result of that, we’re over budgeted.”

Mr. Wilson also cited a transition in town hall. Town treasurer Judy Jardin and town accountant Margie Spitz both retired recently. The transition to new treasurer Peter Graczykowski and new accountant Kimberly Brown resulted in some problems in town finances.

Among them was a mix-up in payments on a short-term loan issued to fund ongoing repairs and maintenance on town hall. In 2011, the town borrowed $100,000, but paid $15,000 in 2012 and 2013 to reduce the amount of the short-term note. The town budgeted $15,000 to reduce the amount of short-term borrowing in the current budget.

According to Ms. Brown, in fiscal year 2014, instead of paying the budgeted $15,000 to reduce the amount of the note as intended, the entire $70,000 balance was paid off, leaving a budget deficit of $45,288, the amount already spent on repairs to town hall.

Town officials said the revenue from local receipts, miscellaneous items such as licences, fines, penalties and interest from late tax payments, and other items fell short of projections, in part because the Aquinnah side of Menemsha Pond is closed to commercial scalloping this year. In a normal year, the town would realize $6,000 to $7,000 in commercial license fees.

Late taxes

Delinquent tax accounts are a recurring issue in Aquinnah. In recent years voters appropriated money to hire a part-time employee to research accounts and begin proceedings against delinquent taxpayers. According to Mr. Wilson, that resulted in an increase in tax revenue during the previous fiscal years. He speculated that paying off large tax debts may be contributing to the current shortfall.

“We have increased effort on the tax title, which causes people to pay the taxes which are overdue for a long time,” Mr. Wilson said at a December 9 meeting of the board of selectmen. “When they pay these old taxes, they sometimes don’t pay the new taxes, which also have a lot of interest and penalties because it’s not current.”

Taxpayers who have not paid bills issued for the first two quarters of the current year, or have paid only part of the amount owed, are not considered delinquent.

According to tax records, as of December 29, there are 82 tax accounts from 2014 currently delinquent. The delinquent accounts total $49,423.

There are currently 75 properties in tax title, a process that allows the town to put a lien on the property, and charge increased penalties. Under state law, properties in the tax title process are subject to a 16 percent interest charge on the unpaid balance. The current tax title properties in Aquinnah total $1,554,737. If those properties are ever sold, the back taxes must be paid to the town before the sale can be completed. If the taxes are not paid six months after the property is placed in tax title, the town can take legal action in the Massachusetts Land Court. After a sometimes lengthy and costly process, if the Land Court finds taxes are due, it will issue a finding and set a time frame for the taxes and penalties to be paid. If they are still not paid, the town can move for foreclosure of the property. If the Land Court issues a foreclosure judgement, the town takes ownership of the property, and the taxpayer loses all rights in the property.  The town may then sell the property to recover the debt.