The Town’s operating and capital budgets are approved each year at the Annual Town Meeting in the Spring. Occasionally, supplemental spending is also approved at a Special Town Meeting as was recently done in November. While voters approve spending, the setting of the tax rate itself happens in late fall after property values are adjusted to reflect up to date fair market values (based on recent sales data) and new construction is added to the Town’s tax base.
A review of the new valuation data and confirmation of sticking with a single tax rate for all properties was undertaken at this past Monday’s Select Board meeting (12/5/22.) The Assessors, lead by staff member and Principal Assessor Michelle Branciforte, walked through the numbers. Overall, the total value of all properties comes to just under $3 billion, an increase of 4.7%. Included in this total is some $20 million in new construction (a few new homes and a significant amount of additions/renovations.)
To determine the tax rate for the current fiscal year (which runs from July 1 through June 30) the total amount of taxes needed as determined by the approved budgets is divided into the total amount of property valuation. The levy needed increased by about 3.1% from FY22 to FY23, the current budget year. With values climbing 4.7% the tax rate is decreasing by 1.6%, going from $10.60 per thousand of value to $10.43. A typical homeowner (home value of $1.3 million) will see their annual property tax increase by $247, a modest 1.8% (lower due to new growth and the fact that other classes of property appreciated more quickly. Individual circumstances will vary.)
The Select Board affirmed the long-standing practice in Manchester of keeping to a single tax rate. With the vast majority of property being residential (94%) a small shift away from residential taxes would cause a disproportionately high burden on commercial, industrial and personal properties. Thus, the decision was made to stay with a single tax rate. Similarly, it does not make sense to grant a residential exemption, small commercial property exemption or an open space discount given our circumstances and the Select Board voted accordingly.
While the final paperwork and certification from the state is being processed for this year’s tax rate, we have closed the books on FY22 and are preparing the preliminary budget for FY24. The School District will be presenting their preliminary budget for next year at a meeting on December 14. The Town’s preliminary budget will be presented the next evening before a joint meeting of the Select Board and the Finance Committee. Once these preliminary budgets are presented, the next phase of the budget process begins where the boards and committees scrutinize every line-item request. Final budget proposals are assembled by early March.
FY22 ended with budgets being under-spent and revenues exceeding estimates thus the Town’s Fund Balance grew. This will allow additional one-time funds to be put toward capital projects, with the bulk of the extra money going to more water pipe replacement work as we continue to replace century old, leaking pipes.
With inflation running high and uncertainty about what direction the economy will take next, it is a particularly challenging year for crafting new operating budgets. The School District has relied on reserve funds to fill a gap in their operating budget. With reserve funds all but depleted this can no longer continue and to make up the difference an override request is very likely. We are also facing hard choices in our public safety departments. There is demand for more staffing in the Fire, Police and Harbor operations. Public safety is a high priority but meeting all the requests within the limits of Proposition 2 ½ will be difficult at best if savings cannot be found elsewhere.
Additional emphasis in this budget cycle is being placed on long-term capital needs. We have a town facility study underway. The School District just completed an updated analysis of the Essex Elementary School and the Middle High School. Mapping out the timing and affordability of the many needs here will require a good deal of discussion in the months ahead. Helping our financial picture will be the retirement of long-term debt and the full funding of our pension and retiree health insurance obligations but this is still some 10 years off, underscoring the importance of aligning our fiscal condition with our infrastructure and facility needs.
The next few months will be busy fine-tuning budget proposals in preparation for the spring Annual Town Meeting. Your input is welcomed as the choices that are made impact the quality of your municipal services.
